Canadian Sales Tax and Public Service Bodies' Rebates – Foundant Technologies

Canadian charities in Canada are entitled to recover a portion of the Goods and Services Tax (GST), Harmonized Sales Tax (HST), or Provincial Sales Tax (PST) which they pay on purchases through the Public Service Bodies' (PSB) Rebate, administered by the Canada Revenue Agency (CRA). Because foundations are nonprofits, they do not receive the full tax amount back. The unreturned portion must be expensed separately. This article explains how to record both the outgoing tax expense and the incoming rebate within CommunitySuite.

Understanding the Rebate Rates

The PSB rebate applies to eligible purchases at rates that vary depending on your province and organization type. Provinces using HST combine the federal and provincial components into a single tax, while provinces using GST and PST administer them separately. In all cases, the rebate covers only a portion of the tax paid; the remainder must be expensed.

Always confirm your applicable rates using CRA Guide RC4034 before recording transactions.

Example of Ontario HST at 13%

The table below breaks down the federal and provincial components of Ontario's 13% HST, showing the rebate rate, recoverable amount, and non-recoverable amount for each.

Component	Full Rate	Rebate Rate (Foundation)	Recoverable	Non-Recoverable
Federal	5%	50%	2.50%	2.50%
Provincial	8%	82%	6.56%	1.44%
Total	13%		9.06%	3.94%

2.50% is recorded as the federal tax recoverable (A/R)
6.56% is recorded as the provincial tax recoverable (A/R)
3.94% is the non-recoverable portion and must be expensed

The same principles apply regardless of whether your province uses GST, PST, GST alone, or HST. The recoverable and non-recoverable percentages will differ, refer to RC4034 for your province's specific rates.

Money Out: Recording Tax Expenses in CommunitySuite

When a foundation incurs an expense subject to a rebatable sales tax, the voucher must be split to reflect the recoverable and non-recoverable portions of the tax.

To create an AP Voucher Entry:

Enter the expense as normal using the full invoice subtotal (pre-tax amount) posted to the appropriate expense account.
Add a line for the Federal recoverable portion:
- Calculate the applicable federal coverable percentage of the invoice subtotal.
- Post to your Tax Recoverable - Federal account (A/R).
Add a line for the Provincial recoverable portion:
- Calculate the applicable provincial recoverable percentage of the invoice subtotal.
- Post to your Tax Recoverable - Provincial account (A/R). Alternatively, both recoverable amounts may be combined into a single Tax Recoverable account depending on your chart of accounts setup.
Add a line for the Non-Recoverable portion:
- Calculate the non-recoverable percentage of the invoice subtotal.
- Post to your Tax Expense account (or the appropriate operating expense account).
The total of all lines should equal the full invoice amount, including tax.

Example (Ontario HST)

The table below shows how to split a $1,130.00 invoice across the expense, recoverable, and non-recoverable tax lines.

Invoice Subtotal: $1,000.00
Tax (13%): $130.00
Total Invoice: $1,130.00

Line	Account	Calculation	Amount
Expense	Program Expense	Invoice subtotals	$1,000.00
Federal Tax Recoverable	Tax Recoverable - Federal	$1,000 x 2.50%	$25.00
Provincial Tax Recoverable	Tax Recoverable - Provincial	$1,000 x 6.56%	$65.60
Non-Recoverable Tax	Tax Expense	$1,000 x 3.94%	$39.40
Total			$1,130.00

Tracking the Non-Recoverable Portion
If the non-recoverable portion is not tracked separately and the full tax amount is posted to the Tax Recoverable account, auditors will identify the discrepancy and require year-end adjustments.

Money In: Recording the PSB Rebate

When the CRA issues the Public Service Bodies' Rebate, record the receipt using a Journal Entry.

Journal Entry to Receive the Rebate

The table below shows the journal entry structure for recording the rebate deposit when the CRA issues payment.

	Account	Debit	Credit
Debit	Bank Account (where deposit was received)	Rebate amount
Credit	Tax Recoverable - Federal		Federal portion
Credit	Tax Recoverable - Provincial		Provincial portion

If you use a single combined Tax Recoverable account, credit that account for the full rebate amount.

Recording Interest on a Late Rebate
If the CRA is late issuing the rebate, they may pay interest on the outstanding amount. This interest should not be credited to the Tax Recoverable account. Instead, credit the interest amount to your Interest Revenue account.

Account Setup Recommendations

Your chart of accounts can be configured using either one or two receivable accounts.

Options:	Accounts Used:
Two-account method (recommended for audit clarity)	Tax Recoverable - Federal; Tax Recoverable - Provincial
Single-account method	Tax Recoverable (combined)

Both methods are acceptable; however, the two-account method provides clearer audit trails and aligns more directly with the federal/provincial split required on CRA rebate forms.

Summary Checklist

Confirm applicable federal and provincial rebate rates for your province using CRA Guide RC4034.
Split all tax voucher entries into recoverable and non-recoverable portions.
Maintain a Tax Reasonability Lead Sheet for audit support.
On receipt of the rebate, create a Journal Entry debiting the bank and crediting Tax Recoverable accounts.
Record any CRA interest separately to Interest Revenue — not to Tax Recoverable.
File Form GST66 and RC7066-SCH with the CRA within the four-year window.

CRA References: