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Managing downloaded transactions in QuickBooks Online

06.10.21

Read this if you use QuickBooks Online.

Downloading them is the easy part. QuickBooks Online lets you work with downloaded transactions in numerous ways.

QuickBooks Online was built to import transactions from your online financial institutions. You can enter them manually but downloading them saves an enormous amount of time and minimizes errors. It also makes reconciliation much easier, since you can see which transactions have cleared without calling the bank or waiting for a printed statement.

Once they’re in QuickBooks Online, your transactions are stored in a list, waiting for you to further define and categorize each one. Let’s look at how you can work with them to make sure your records are as thorough as possible.

Getting connected to your bank and credit card accounts

As long as you have online access to your bank and credit card accounts, you can set up QuickBooks Online to import cleared transactions. Click the Transactions tab in the toolbar, then click Banking. On the next screen, click Connect account. You’ll see links to popular financial institutions on the next page. If yours isn’t listed, enter its name in the search box at the top of the screen. Follow the onscreen instructions to make your initial connection and start downloading transactions. 

When you’ve completed the connection, you can click Link account in the upper right to add more.

Dealing with transactions

After you set up a connection to a bank or credit card account, its account information will appear in a box on the Banking page.

Once you’ve finished adding accounts, you’ll still be on the Banking page. Each of your connected accounts will appear in a box that includes the balance and the number of transactions that need to be reviewed. There will probably be quite a few, dozens or hundreds, the first time you download, since most financial institutions send you 90 days’ worth the first time. Every time your accounts are updated after that, you’ll only get new ones that have cleared since your last connection.

Tip: QuickBooks Online generally updates once every day. If you want to see your new cleared transactions at any time, click Update in the upper right corner.

Click on any of the account boxes, and its list of downloaded transactions will appear below. Make sure that For review is highlighted. You’ll notice that each row has one of two icons at the far right. Review means that QuickBooks Online has not assigned a category to the transaction. Confirm means it has, and it wants you to either approve it or change it. Check these carefully. Sometimes QuickBooks Online gets it right, but not always.

Click on a transaction in the register to open its action box. Here’s a partial view:

QuickBooks Online allows you to add a great deal of information about each individual transaction in the register.

Categorize is checked by default, since this is the most common action you’ll take in the list. Click Find match if, for example, you received a payment on an outstanding invoice, or Record as transfer. We can help you work with the latter two options.

Select a Vendor/Customer and a Category (if QuickBooks Online hasn’t assigned one or it’s not the best one for that transaction). Click in the Billable box if you want to bill this transaction to a Customer/project. You can also Split transaction if you need to divide it between multiple categories and/or billing statuses.

There are several other options below the section pictured above that allow you to:

  • Add Tags.
  • Attach a file.
  • Create a Rule for how similar transactions should be recorded.
  • Exclude the transaction if you have, for example, a duplicate one or a personal expense.

Before you take either of the latter two actions, talk to us. We don’t want you to do anything that might adversely affect your bookkeeping.

When you’ve finished, click Confirm. The transaction will move from the For review list to the Categorized one. It will now appear in the register for that account.

Once you’ve confirmed a transaction, it moves into the Categorized list.

As you might imagine, it’s a good idea to keep up with your downloaded transactions so you have time to give each the attention it needs. We recommend you review them daily. Your transactions, of course, flow into your reports and taxes, so you want to be sure you’re categorizing them correctly. Contact our outsourced accounting team if you’d like help with this. We're here to help.

Topics: QuickBooks

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  • Kathy Parker
    Principal
    Real Estate, Renewable Energy, Technology
    T 857.255.2025
  • Leah Shanahan
    Principal
    Real Estate, Renewable Energy, Technology
    T 857.255.2038

BerryDunn experts and consultants

Read this if your company uses QuickBooks Online.

QuickBooks Online offers numerous ways to help you track your sales, expenses, and profitability. If you’re using QuickBooks Online Plus or Advanced, you can create and assign Classes to transactions to differentiate between, for example, store departments or product lines. Some of the site’s reports are designed specifically for these tools, like sales by class and profit and loss by class. 
 
You can assign categories to products and services to gain insight into your sales and inventory. There’s a different set of categories that you’ll use when you record bills and expenses. These are important for reporting and tax purposes. You can also add a location field to sales transactions so you can track sales by stores, sales regions, or counties, for example.

What are tags and how do you use them?

Tags are fairly new to QuickBooks Online. They are customizable labels you can assign to transactions (invoices, expenses, and bills). They’re more flexible than the tools we’ve already mentioned—they allow you to track your money any way you want. They don’t affect your books, and they’re not included in the customization criteria for reports. But there are two reports specifically designed for them: profit and loss by tag group and transaction list by tag group.

Creating your own tags

Before you create a tag, you need to create a group. Groups consist of related tags that share a common theme. For example, say you do some event planning. You might have a group titled events. Individual events might read, for example, Grayson Wedding, Spring Art Show, and Hillman Conference.

To get started, click the gear icon in the upper right. Under lists, click tags to get to the tool’s home page. (You can also click on the transactions link in the toolbar, then click the tags tab.) Click new, then tag group. A vertical panel slides out from the right. Enter a name in the group name field. Click the down arrow to select a color, then click save. 

Enter your tags one by one in the fields labeled tag name. Click add after each one until your list is complete. Click the edit button to make any changes. When you’re finished, click done. The main tags page will open again, and you’ll see your new group under tags and tag groups. Repeat to add as many as you’d like, up to 300 tags.

Making the most of the tags in QuickBooks Online

 

You can add tags to any transaction that contains a field for them

Let’s look at how you’d use tags in an expense. Click the expenses link in the toolbar, then new transaction | expense in the upper right. Click the down arrow in the payee field in the upper left and select + add new. Enter Billy’s Bridal in the name field. Leave the type as vendor and click save. Back on the expense screen, select the payment account, payment date, and payment method for the expense (reference number is optional).

Directly below those fields, you’ll see the tags field. Click manage tags if you need to add or edit one; the right vertical pane you saw before will slide out. Otherwise, click in the field below tags. Your list of tags will drop down. Select Grayson Wedding to move it into the field. You can assign as many tags as you’d like to transactions, but you can only select one tag from each group. Finish the expense and save it. 

Go back to the tags home page, and you’ll see that there’s a link to one transaction in the events row. At the end of each row is the action column, where you can run a report, add a tag, and enter or delete a group. Your expense total appears in the money out (by tag) box above it. 

Tags are a great addition to the tools QuickBooks Online provides to help you track incoming and outgoing funds. If you’re not familiar with the others mentioned at the beginning of this column and want to learn how to explore them, let us know. We're here to help.

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Tag, you're it: Making the most out of QuickBooks Online tags

Read this is you are a new renewable energy company looking for accounting solutions.

Setting up a new company in QuickBooks can be challenging enough, but if you are a renewable energy company there are a few additional items to think about. You face unique reporting and tracking requirements for a number of reasons, including tax reporting requirements, potential and existing investors, debt requirements, and grant requirements. Renewable energy companies should take special care in setting up their QuickBooks file. Below is a top 10 list of items to consider when setting up a new company file.

  1. Equity—Have you recorded your initial equity activity?
    Do you have individual capital accounts setup by owner?
    Did some owners contribute items other than cash? Expertise or property? Have you accounted for those properly?
  2. Debt—Do you have all debt financing recorded on the books?
    Debt financing needs to be recorded even if the bank pays some construction vendors directly as part of the agreement.
    Do you have an amortization or payment schedule to assist with recording loan payments properly?
    Does your debt have financial statement reporting requirements or covenant requirements that you must meet annually?
  3. Accounting Basis—Generally Accept Accounting Principles (GAAP) or Tax basis how will you keep your books?
    More and more companies are being required by banks and investors to keep their books on GAAP basis, you should consider future planned investors or financing from the get go as there are some clear distinctions between the two and it may be easier to start with GAAP from the beginning.
    GAAP and tax basis call for some pretty drastic distinctions when it comes to treatment of grant income if they directly relate to a project under development so it’s good to get a handle on this up front.
  4. Construction Costs—Are you capitalizing all construction costs related to your project?
    All costs related to your project must be capitalized on the balance sheet until the project is placed in service at which point you can begin depreciating the value of the project over a period of years.
    Generally, we recommend tracking site work in a separate account as tax and GAAP requirements can call for different treatment of these costs depending on their nature.
    Are you applying for any special grants related to your project? There are a number of federal and state grants available to renewable energy companies which may require breaking your project into cost categories to determine what costs qualify for the grant and what do not? Do you have a mechanism for tracking these costs?
  5. Soft costs―Are you properly capitalizing or expensing soft costs related to your project?  Engineering fees, project management fees and consulting fees if directly related to the project are generally included as part of the capitalized project costs rather than expensed.
    Legal and accounting fees. even if directly related to the project accounting or structuring your project, are generally expensed.
  6. Multiple projects―How are you keeping track of your multiple projects?
    With multiple projects underway at any given time, it is imperative to track these costs by project in QuickBooks and to work with vendors to specify on invoices to what projects costs are related. This is imperative to a lot of grant applications to be able to provide this sort of detail easily and on a consistent basis.
  7. Project details/Contracts details―How are you keeping track of all those details?
    More detail is always good.  In our experience the more detail you have in your files as to cost breakdowns of EPC contracts, etc. the better. Investors and grant evaluators are going to request all this detail and it’s better to have on file than track it down months or even years later.  Vendors are much more cooperative when requesting this documentation up front.
  8. Grant fine print―Have you read the fine print of the grants you’ve received?
    Pay close attention to these green energy grants fine print. Many of the grants have repayment requirements were the project taken out of service within a certain timeframe or have repayment requirements under other circumstances. These are items that may be required to be disclosed in financial statements and are just good business to be aware of.
  9. Organizational costs―Do you know what these are and are you tracking?
    Organization costs are legal, accounting and any other costs related to the actual formation and entity structuring of a company.  In our experience, these costs can be significant with the complex equity structures of many renewable energy companies. Make sure you are tracking these costs as amounts in excess of $5,000 are required to be amortized over 15 years for tax purposes.
  10. Project budgets and overall budgets―Do you have a realistic budget?
    Use QuickBooks budgeting features to track both project budgets as well as your Company’s overall budgets. Projects can go over budget quickly and it’s critical to keep on top of it to ensure the overall mission and sustainability of the company.

Once you have looked at these questions, you will be able to to create an effective budget and financials. If you have questions about your financial operations, QuickBooks, or setting up budgets, please contact the team. We’re here to help. 
 

Article
Top 10 QuickBooks considerations when setting up a new renewable energy company

Read this if you are a small business owner. 

We are living in an age of information overload. A quick Google search produces millions of results and a scroll through social media offers hundreds of views. We are able to access this endless data around the clock using these tiny devices, which we spend more time in our hands than not on most days. Unending technological advancements increase the ability of business stakeholders to consume data, and that amplified ability fuels a bigger demand for more data. It is widely claimed that financial reporting has become far too burdensome and often provides more confusion than information to end-users. While each item in the reporting package may very well help users to better appreciate the financial statements, the worth is being lost due to the volume of data in its entirety. 

Financial statement simplification

So, what does this information overload mean to business owners today, and can you really achieve financial statement simplification while still providing effective and relevant information to your stakeholders? Our answer is ‘YES!’ You can add immediate value to an entity’s financial statements, without a substantial investment of time, money, and resources. By creating a month-end checklist, defining stakeholders' needs, considering materiality, and automating the reporting process, your organization can not only simplify its financial reporting, but also add immense value.

When it comes to month-end close, your team may have a very clear understanding of what needs to be done and who is responsible for each task. However, documenting the process is crucial to provide clarity and simplification. Your month-end checklist can be used as a tool to keep everyone organized, outline due dates, and define roles and responsibilities. A month-end checklist would include tasks such as reviewing outstanding accounts receivable (AR) and accounts payable (AP), booking depreciation, adjusting prepaids and accruals, bank reconciliations and posting loan interest. This outline should serve as a forecasting guide to quantify resources needed for the month-end close.

Relevant and specific financial reporting

Whether it is your banking institution, investors, auditors, or management, it is important to identify which reports (and what targeted and specific information) each set of users will need and in what frequency they want it. Your organization may be producing excellent financial reporting that is too extensive and too frequent for your stakeholders' needs. Once you gather what each audience requires, it makes the process more efficient and the information for each audience more valuable.

The methods of accounting your company uses can have a material effect on the financial statements and their usefulness to end users. Materiality refers to the impact that a misstatement or omission of information can have on a company’s financial statements. Materiality varies based on the size of an entity; therefore, it is crucial that every member of your accounting team is aware of the materiality your organization has decided on using. It is important to note that when the cost of a method of accounting outweighs the benefit of doing so, you are able to depart from this accounting principle. Your company should revisit materiality on a regular basis, since eliminating some transactions can significantly reduce the amount of time required to issue financial statements.

Automation options for improved accuracy

Lastly, there are countless options available for not only automating your reporting process but minimizing time spent during the month on various accounting functions. These tools are not only effective in reducing labor and administrative costs but also improving accuracy by mitigating human error. Accounts payable tools like Bill.com and Expensify streamline your payments and approvals process and can save an average of 50% of time spent on AP, this is nearly 36 business days per year. 

Our team at BerryDunn is available to discuss your specific needs and help to recommend the best tools, processes, and procedures to simplify your financial reporting and month-end close process. 

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Simplify financial reporting with an expert at your doorstep

Read this if you are working with an auditor.

The standard report an auditor issues on an entity’s financial statements was created in 1988, and has only had minor tweaking since. Amazing when we think about how the world has changed since 1988! Back then:

  • The World Wide Web hadn’t been invented
  • The Simpsons wasn’t yet on TV, and neither was Seinfeld
  • The Berlin Wall was still standing
  • The Single Audit Act celebrated its fourth birthday

The Auditing Standards Board (ASB), an independent board of the American Institute of CPAs (AICPA) that establishes auditing rules for not-for-profit organizations (as well as private company and federal, state, and local governmental entities) has decided it was high time to revisit the auditor’s report, and update it to provide additional information about the audit process that stakeholders have been requesting.

In addition to serving as BerryDunn’s quality assurance principal for the past 23 years, I’ve been serving on the ASB since January 2017, and as chair since May 2020. (And thanks to the pandemic our meetings during my tenure as chair have been conducted from my dining room table.)  We thought you might be interested in a high-level overview of the coming changes to the auditor’s report, which will be effective starting with calendar 2021 audits, from an insider’s perspective.

So what’s changing?

The most significant changes you’ll be seeing, based on feedback from various users of auditor’s reports, are:

  1. Opinion first
    The opinion in an audit report is the auditor’s conclusion as to whether the financial statements are in accordance with the applicable accounting standards, in all material respects. People told us this is the most important part of the report, so we’ve moved it to the first section of the report.
  2. Auditor’s ethical responsibilities
    We’ve pointed out that an auditor is required to be independent of the organization being audited, and to meet certain other ethical responsibilities in the conduct of the audit.
  3. “Going concern” responsibilities
    We describe management’s responsibility, under U.S. generally accepted accounting principles, and the auditor’s responsibility, under the auditing rules, for determining whether “substantial doubt” exists about the organization’s ability to continue in existence for at least one year following the date the financial statements are approved for issuance.
  4. Emphasis on professional judgment and professional skepticism
    We explain how an audit requires the auditor to exercise professional judgment (for example, regarding how much testing to perform), and to maintain professional skepticism, i.e., a questioning mind that is alert to the possibility the financial statements may be materially misstated, whether due to error or fraud.
  5. Communications with the board of directors
    We point out that the auditor is required to communicate certain matters to the board, such as difficulties encountered during the audit, material adjustments identified during the audit process, and which areas the auditor treated as “significant risks” in planning and performing the audit.
  6. Responsibility related to the “annual report”
    If the organization issues an “annual report” containing or referring to the audited financial statements, we explain the auditor is required to review it for consistency with the financial statements, and for any known misstatements of fact.
  7. Discussion of “key audit matters”
    While not required, your organization may request the auditor to discuss how certain “key audit matters” (those most significant to the audit) were addressed as part of the audit process. These are similar to the “critical audit matters” publicly traded company auditor’s reports are now required to include.

Yes, this means the auditor’s report will be longer; however, stakeholders told us inclusion of this information will make it more informative, and useful, for them.

Uniform Guidance standards also changing

Is your organization required to have a compliance audit under the federal Uniform Guidance standards? That report is also changing to reflect the items listed above to the extent they’re relevant.

What should you do?

Some actions to consider as you get ready for the first audit to which the new report applies (calendar 2021, or fiscal years ending in 2022) include:

  1. Ask your auditor what your organization’s auditor’s report will look like
    Your auditor can provide examples of auditor’s reports under the new rules, or even draft a pro forma auditor’s report for your organization (subject, of course, to the results of the audit).
  2. Outline and communicate your process for developing your annual report
    If your organization prepares an annual report, it will be important to coordinate its timing with that of the issuance of the auditor’s report, due to the auditor’s new reporting responsibility related to the annual report.
  3. Discuss with your board whether you would like the auditor to include a discussion of “key audit matters” in the auditor’s report
    While not required for not-for-profits, some organizations may decide to request the auditor include a discussion of such matters in the report, from the standpoint of transparency “best practices.”

If you have any questions about the new auditor’s report or your specific situation, please contact us. We’re here to help.
 

Article
A new auditor's report: Seven changes to know

Read this if your company does business in the EU.

Major changes are coming to the EU VAT laws on the online supply of goods and services. The rules, which apply as from July 1, 2021, will affect U.S.-based businesses selling or facilitating sales to private individuals in EU member states. With just over a month remaining before the rules become effective, such businesses should begin immediately to prepare for their new VAT registration and collection responsibilities.

What are the new EU VAT rules?

The EU VAT rules applicable to cross-border B2C e-commerce activities are undergoing a major “refresh”—or modernization—as from July 1, 2021 (postponed six months from the originally planned effective date of January 1, 2021). From July, updated VAT rules will apply to online sales (including online marketplaces) to EU private consumers and to the import of low value goods. (The European Commission published explanatory notes on the rules on September 20, 2020, which include clarifications, FAQs and examples.)

The objectives of the new EU VAT rules are to: (i) simplify compliance obligations for vendors that potentially have to comply with the VAT rules in the 27 EU member states; (ii) increase VAT revenue for the individual member states by bringing more transactions within the scope of the EU VAT net; and (iii) reduce VAT fraud.

Any business making or facilitating online sales or deliveries of goods to consumers in the EU will likely be impacted in some way by the changes.

The EU VAT law changes are as follows:

Intra-EU sales to consumers

All B2C sales of goods will be taxed in the country of destination, meaning that sellers will need to collect VAT in the EU member state to which the goods are shipped.

The existing thresholds for distance sales in the EU will be abolished and replaced by an EU-wide registration threshold of €10,000 (approximately $12,000). This is an important change and potentially could create considerable EU VAT registration and reporting obligations for U.S.-based businesses selling goods from warehouses located in the EU if not proactively addressed.

To reduce the administrative burden and simplify VAT reporting, a new reporting system, called the One-Stop Shop (OSS) will be expanded to include the distance sale of goods. U.S. businesses can register for the OSS scheme in the EU member state of dispatch and can report and remit the VAT due via a pan-EU VAT return instead of having to VAT register in each EU member state.

Sales via online marketplaces

In certain circumstances, businesses that operate an online marketplace, known as an “electronic interface” in the EU) or that facilitate the sale of third-party goods through an online marketplace will be considered the “deemed supplier” of the goods sold to EU customers and will be required to collect and pay VAT on such sales. As a result, businesses that sell via online marketplaces (e.g., Amazon, eBay, etc.) will not be required to account for VAT on such sales. 
Imports of low value goods

The VAT exemption for “low-value imports,” i.e., goods coming from outside the EU that do not exceed a value of €22 (approximately $26) will be abolished. Instead, the sale of low-value goods not exceeding €150 (approximately $180) to consumers in the EU through the business’ own website will be subject to VAT at the applicable rate in the destination country. The VAT due on low value goods can either be collected at the point of sale by the seller or collected from the consumer before the goods are released by the customer broker/delivery service. Where the seller opts to collect VAT at the point of sale, it can VAT register under the new Import One-Stop Shop (IOSS) system to account for and remit the VAT due.

VAT registration under the IOSS has several benefits, including:

  • Transparency to consumers: The customer will not be faced with any unexpected VAT costs since the total amount paid for the goods is VAT-inclusive;
  • Reduced compliance burden: Sellers can use a single IOSS registration to report and pay the VAT due on all sales covered by IOSS. Otherwise, if the seller acts as the importer (e.g., sells goods under delivered duty paid terms), it may need to register for VAT in multiple EU member states;
  • Quick customs clearance: IOSS is designed to enable goods to be cleared through customs quickly as no VAT is due at the time of importation, thus facilitating the speedy delivery of goods; and
  • Flexible logistics: IOSS simplifies logistics since goods can be imported into the EU in any EU member state. If IOSS is not used, goods can only be imported and cleared for customs in the destination EU member state, which may result in delays and additional costs.

How will the changes impact nonresident sellers?

As noted above, the EU rule changes will significantly affect U.S.-based businesses selling or facilitating the sale of goods and services online to consumers located in the EU. With just over a month left before the rules become effective, any U.S.-based business that may be impacted should take immediate steps to:

  • Understand the EU rules and how they will apply;
  • Assess the impact of the rules on supply chains;
  • Consider the impact on pricing due to different VAT rates applying in different jurisdictions;
  • Identify any adjustments that can be made (where possible) to mitigate the impact of the rules;
  • Be prepared to comply with new VAT obligations, including additional registrations, charging and collecting VAT, filing tax and/or information returns, etc.;
  • Update and adapt accounting and billing systems and master data records to identify when VAT should be applied and the appropriate rates in multiple jurisdictions; and
  • Cancel existing EU VAT registrations for distance sales that may be replaced by the OSS registration.

Failure to comply with the rules could result in the imposition of interest and penalties on the historic VAT liability. In addition to the EU VAT consequences, business selling goods that are imported into these jurisdictions must also take into account any customs implications because any compliance deficiencies could result in imported goods being delayed in customs, causing customers to be frustrated by shipping delays.

For questions about your specific situation, please contact the International Tax team. We’re here to help. 

Article
New VAT rules in the EU: What U.S. e-commerce businesses need to know 

Read this if your company does business in Canada. 

Major changes are coming to Canada’s Goods and Services Tax/Harmonized Services Tax (GST/HST) on the online supply of goods and services. The rules, which apply as from July 1, 2021, will affect U.S.-based businesses selling or facilitating sales to private individuals in Canada. With just over a month remaining before the rules become effective, such businesses should begin immediately to prepare for their new GST/HST registration and collection responsibilities.

What are the GST/HST changes in Canada?

Currently, only nonresidents that carry on business in Canada are generally required to register for and collect GST/HST (levied at the federal level in Canada) on taxable supplies of goods and services made in Canada. If the nonresident does not conduct business in Canada, it need not register for or collect GST/HST.

The impending rules aim to level the playing field between Canadian businesses (which must charge GST/HST on the supply of goods and services) and foreign suppliers by ensuring that GST/HST applies to all goods and services used in Canada, regardless of how they are supplied or whether the supplier is Canadian or nonresident. The rules will significantly impact nonresident vendors and online platform operators, in that foreign businesses will be required to register for GST/HST, collect GST/HST from customers, and report and remit tax to the Canadian tax authorities. Three types of supplies by foreign businesses will be affected:

  • Supplies of digital services
  • Supplies of accommodation made through an accommodation platform (AP)
  • Online supplies of goods through a fulfilment warehouse

Digital services

Foreign businesses and platforms that do not have a physical place of business in Canada but that supply goods and services online to Canadian consumers and/or non-GST/HST-registered businesses (i.e., B2C transactions) will be required to register for GST/HST, resulting in an obligation to collect, remit and report tax. The tax rate will be the rate applicable in the province where the consumer is resident.

Nonresident businesses will have to register for GST/HST purposes when their sales exceed CAD 30,000 (approximately USD 25,000) over a 12-month period or they may register voluntarily where the threshold is not exceeded. A simplified online registration will be available for these businesses, but it will not be possible for the nonresident business to reclaim GST/HST incurred on its own purchases. If nonresident businesses wish to recover GST/HST paid on business expenses, they may be able to register under the regular GST/HST regime.

Accommodation platforms

An AP is a digital platform that facilitates the supply of short-term rental accommodations (i.e., rentals for less than one month) to private customers for a price of at least of CAD 20 (approximately USD 16) per day (e.g., Airbnb, VRBO, etc.).

Nonresident APs will be required to register for GST/HST, and to collect, remit and report tax on the rental charges in cases where the owner of the property is not GST/HST-registered. Where the property owner is GST/HST registered, the AP will not be responsible for GST/HST; instead, the property owner will be required to collect/remit GST/HST on the rental charges. The GST/HST rate will be the rate applicable in the province where the property is located.

APs subject to these changes should register for GST/HST under the simplified online registration.

Fulfilment warehouses and websites

GST/HST registration will be required for the following types of transactions in cases where the nonresident business’ sales to consumers exceed, or are expected to exceed, CAD 30,000 over a 12-month period:

  • Direct sales of goods by a nonresident business directly (i.e., not via a distribution platform) through its website to Canadian consumers: In this case, the nonresident business will have to register, charge and account for GST/HST. 
  • Sales of goods by a nonresident business through a distribution platform to consumers in Canada: The distribution platform operator will be required to register for GST/HST and account for GST/HST in Canada. It should be noted that no GST/HST will be due on the service fee charged by the distribution platform operator to nonresident businesses.
  • Online sales of goods by a nonresident business (but not through a distribution platform) to customers, where the goods are located in a Canadian fulfilment warehouse: The nonresident business will be required to register for GST/HST and will need to keep records on its foreign vendors and submit these to the Canadian tax authorities. These information returns will give the tax authorities insight into which nonresident businesses need to be GST/HST-registered.

Nonresident businesses that carry out the above transactions will have to register under the standard GST/HST rules rather than under the new simplified regime and will generally be able to reclaim GST/HST incurred on their purchases.

Potential Provincial Sales Tax (PST) implications

In addition to having GST/HST registration and collection obligations, nonresident vendors also may be required to register for PST. Currently, British Columbia, Manitoba, Quebec, and Saskatchewan impose a PST, and three of these provinces (i.e., British Colombia, Quebec, and Saskatchewan) have introduced rules requiring nonresident vendors selling to customers in these provinces to register for PST purposes. The rules vary by province and will need to be considered in addition to the new GST/HST rules.

How will the changes impact nonresident sellers?

As noted above, the Canadian rule changes will significantly affect U.S.-based businesses selling or facilitating the sale of goods and services online to consumers located in Canada. With just over a month left before the rules become effective, any U.S.-based business that may be impacted should take immediate steps to:

  • Understand the Canadian rules and how they will apply;
  • Assess the impact of the rules on supply chains;
  • Consider the impact on pricing due to the GST/HST and the varying PST rates applied in in the aforementioned provinces;
  • Identify any adjustments that can be made (where possible) to mitigate the impact of the rules;
  • Be prepared to comply with new GST/HST obligations, including additional registrations, charging and collecting GST/HST, filing tax and/or information returns, etc.; and
  • Update and adapt accounting and billing systems and master data records to identify when GST/HST should be applied and the appropriate rates in multiple jurisdictions.

Failure to comply with the rules could result in the imposition of interest and penalties on the historic GST/HST liability. In addition to the GST/HST implications in Canada, business selling goods that are imported into these jurisdictions must also take into account any customs implications because any compliance deficiencies could result in imported goods being delayed in customs, causing customers to be frustrated by shipping delays.

For questions about your specific situation, please contact the International Tax team. We’re here to help. 

Article
New GST/HST rules in Canada: What U.S. e-commerce businesses need to know  

Read this if you are a plan sponsor of employee benefit plans.

This article is the sixth in a series to help employee benefit plan fiduciaries better understand their responsibilities and manage the risks of non-compliance with Employee Retirement Income Security Act (ERISA) requirements. You can read the previous articles here.

Plan sponsors have a fiduciary responsibility to provide oversight over the operations of employee benefit plans. This oversight involves a multitude of varying responsibilities. Failure to provide sufficient oversight can lead to non-compliance with rules and regulations. However, even if plan sponsors are providing sufficient oversight, lack of documentation of the oversight is arguably equally as severe as no oversight at all. Here are some common fiduciary responsibilities and how you should document them. 

Review of the report on service organization’s controls

Most employee benefit plans have outsourced a significant portion of the plan’s processes, and the internal controls surrounding those processes, to a service organization. Regardless of how certain plan-related processes are performed—internally or outsourced—the plan sponsor has a fiduciary responsibility to monitor the internal controls in place surrounding significant processes and to determine if these controls are suitably designed and effective. The most commonly outsourced processes of an employee benefit plan are the administration, including recordkeeping of the plan, through a third-party administrator; payroll processing; and actuarial calculations, if applicable to the plan.

When plan processes are outsourced to service organizations, generally the most efficient way to obtain an understanding of the outsourced controls is to obtain a report on controls issued by the service organization’s auditor. You should request the service organization’s latest System and Organization Controls Report (SOC 1 report). The SOC 1 report should be based on the Statement on Standards for Attestation Engagements No. 18, Reporting on the Controls at a Service Organization, frequently known as SSAE 18.

Plan sponsors should perform a documented review of the SOC 1 report for each of the plan’s service organizations. The documented review should most notably include discussion of any exceptions noted within the service auditor’s testing performed, identification of subservice organizations and consideration if subservice organization SOC 1 reports need to be obtained, and assessment of the complementary user entity controls outlined in the SOC 1 report. The complementary user entity controls are internal control activities that should be in place at the plan sponsor to provide reasonable assurance that the controls tested at the service organization provide the necessary level of internal control over the plan’s financial statements. Contact a BerryDunn professional to obtain our SOC report review template to assist in documenting your review.

Documentation of the plan within minutes

To provide general plan oversight, plan sponsors should have a group charged with the governance of the plan. This group should meet on a routine basis to review various aspects of the plan’s operations. Minutes of these meetings should contain evidence that certain matters that would be of interest to the Department of Labor (DOL) were discussed.

We recommend minutes of meetings document the following:

  • Investment performance—The plan sponsor has a fiduciary responsibility to ensure the investments offered by the plan are meeting certain performance expectations. Investment statements and the plan’s investment policy should be reviewed on a regular basis with documentation of this review retained in minutes of meetings. Any conclusions reached about the need to change investments or put an investment on a “watch-list” should also be documented in the minutes, including any additional steps that need to be taken.
  • SOC 1 report review—As noted above, the plan sponsor has a fiduciary duty to ensure all third-party service organizations utilized by the plan have suitably designed and effective internal controls. Plan sponsors should perform a documented review of the SOC 1 report for each of the plan’s service organizations. The results of these reviews should then be reported at plan oversight meetings with any subsequent actions or conclusions documented in the minutes to these meetings.
  • Reasonableness of fees—The DOL requires plan fiduciaries to determine if the fees charged under covered service provider agreements are reasonable in relation to the services provided. To determine the reasonableness of fees, the plan may (1) hire a consultant, (2) monitor industry trends regarding fees, (3) consult with peer companies, (4) use a benchmarking service, or (5) conduct a request for proposal. Failure to determine the reasonableness of the fees charged can result in a prohibited transaction. When doing such a review, the fiduciaries of the plan should document in the minutes the steps taken and conclusions reached.
  • Overall review of the plan—Plan sponsors have a fiduciary responsibility to review the activity of the plan as well as participant balances. We recommend plan sponsors implement and document monitoring procedures over the activities of the plan and participant balances. This review could be incorporated into documented self-testing procedures, by haphazardly selecting a sample of participants each quarter and reviewing their account activity and participant balances. The results of such self-testing should then be reported at plan oversight meetings with any subsequent actions or conclusions documented in the minutes to these meetings. Reach out to a BerryDunn professional to obtain our participant change review workbook to assist in performing this self-testing.

Retention of salary reduction agreements

During our audits of employee benefit plans, we often note that employee deferrals are not consistently supported by salary reduction agreements or other forms maintained in employees’ personnel files. Many third-party administrators allow participants to make changes to their elective deferral rates directly through the third-party administrators without the involvement of the plan sponsor.

We often recommend that you maintain all changes to employee elective deferral rates in employees’ personnel files using salary reduction agreements. We also recommend that employees’ elections to not participate in the plan be documented in their personnel file. If employees can elect to change their deferral rates directly with the third-party administrator, we typically recommend that management print support from the third-party administrator’s online portal as documentation to support the change in the employee’s deferral rate and retain this support in the employees’ personnel file. However, if the third-party administrator’s online portal provides adequate history of deferral election changes, the plan sponsor may be able to rely on this portal for documentation retention. In these instances, the plan auditor should request a deferral feedback report directly from the third-party administrator.  

Monitoring of inactive accounts

Inactive accounts should be monitored by the plan sponsor for unusual activity or excessive fees that may be posted to these accounts. To the extent that inactive accounts have not exceeded $5,000, consideration should be given to cashing out the accounts if allowed by the plan document. Plan sponsors should, on a periodic basis, review the accounts of inactive participants or those who have been separated from service to ascertain whether the changes and charges to those accounts appear reasonable.

Plan sponsors have many documentation responsibilities. This list is not meant to be all-inclusive. And, the facts and circumstances of each employee benefit plan will change the applicability of these items. However, this list should be used as a tool to help plan sponsors perform a deep dive of their current plan documentation processes. And, hopefully, a result of this deep dive will be a robust documentation process that deliberately documents all major decisions and review functions related to the plan.

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Plan documentation: Another key to successful oversight

Read this if you are a renewable energy developer, installer, or investor.

President Biden’s Fiscal Year 2022 Budget, released on May 28, 2021, includes four energy credit expansions: The Renewable Energy Investment Credit, the Renewable Energy Production Tax Credit, the Carbon Oxide Sequestration Tax Credit, and new tax credits for qualified advanced energy manufacturing. Additional information on President Biden’s plan to prioritize clean energy can be found in the US Department of Treasury’s Revenue Proposals here. Here are some highlights of the budget, and what the credits could mean for the renewable energy sector.

Opportunities for increased revenue

Expansion of the following energy credits will have the potential to increase revenue for companies that develop solar and wind energy facilities:

  • Renewable Energy Investment Credit – The proposal includes expanding the full tax credit, back to 30%, for construction after December 31, 2021 and before January 1, 2027. With the expansion of the full tax credit, the likelihood of an upsurge in construction of solar and wind energy projects is foreseeable.
  • The credit includes expanding the eligible property to include stand-alone energy storage technology. This may translate to an increase in sales for companies supplying energy storage equipment or facility development.
  • Renewable Electricity Production Credit – Under the current rules the production tax credit no longer applies for construction after 2021.  The proposal includes expanding the full production tax credit for construction after December 31, 2021 and before January 1, 2027. This proposal includes wind, biomass, geothermal and hydropower facilities, among others, which means any company associated with the supply chain could see an upsurge in future orders.
  • Additionally, the budget provides $2 billion to increase job opportunities for skilled laborers to build clean energy projects in the US. This could mean it’s time for clean energy companies to begin planning on hiring. In additional to creating jobs, the goal of Biden’s plan to prioritize clean energy is to be carbon-neutral by 2035.

If you have questions about your specific business, or want to learn more, please contact our Renewable Energy team. We're here to help.

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Energy credit expansion in the Made in America Tax Plan