Hi accountant_not,
Thanks for reaching out here. QuickBooks Online Sales tax feature enables you to set up the required rates, so you can record meals and entertainment with confidence. I'd be glad to help!
As others have suggested, you'll create a sales tax rate of 2.5% for the eligible portion, but you'll also need to set up the remaining 2.5% for the ineligible portion.
Here's how to set up the eligible portion for Alberta;
1. Open Taxes and then Sales tax from the left menu
2. Click on Manage sales tax
3. Locate the Canada Revenue Agency and select Add rate
4. Enter the Tax name as 'GST 2.5% Liability’
5. Checkmark the I pay this on purchases box
6. Enter the rate as 2.5%
7. Choose Liability from the Account drop-down
8. Select Input tax credits (ITCs) from the Show tax amount on return line drop-down
9. Hit Add
10. Next to the newly created tax rate, select Make inactive. This will prevent it from showing up in your Sales and Expense forms but still allow you to add them to a group rate.
Follow these steps for the ineligible portion;
1. Select Add rate
2. Enter the Tax name as 'GST 2.5% Expense’
3. Select the I pay this on purchases box
4. Enter the Tax on purchases rate as 2.5%.
5. Select Non-tracking from the Account drop-down
6. Hit Add and then select Make inactive as noted in step 10 above.
Here's how to create the group sales tax rate;
1. Select Add tax
2. Locate the Group rate section and select Add
3. Enter the Group name as Meals and Entertainment
4. Select GST 2.5% liability from the first Tax rate drop-down
Note; Net amount will be the default selection in the Applicable on drop-down
5. Select GST 2.5% Expense from the second Tax rate drop-down. Select Net amount from the Applicable on drop-down menu
6. You should have 2 sales tax rates in total
7. Select Add
Please feel free to reach back out with other questions. We're always happy to help!
