Syrasoft

Syrasoft and Harmonized Sales Tax (HST)

As the Canadian Ministry of Finance has introduced the Harmonized Sales Tax, we at Syrasoft realize many of our clients need to adjust the Syrasoft Software to accommodate the new tax requirement. This document is intended to describe ways to handle the new tax structure within the Syrasoft Software.
There are numerous scenarios to consider. In this document, we’ll take a look at the following scenarios and how they can be handled with Syrasoft:

A tenant has prepaid for a unit and as of July 1st 2010, they have a credit balance on the account to be applied to charges on or after July 1st, 2010.
A tenant is renting a unit using a discount plan (flex plan) and within that plan, some or all of the monthly charges occur on or after July 1st, 2010.
A tenant is renting a unit before July 1st, 2010 and the billing period is quarterly, bi-annual or annual.

Before we talk look at the various scenarios, here’s a review of the documentation provided by the Canadian Finance Ministry:

“Ministry of Finance Tax Information Notice ISSUED: October 14, 2009 REVISED: April 6, 2010 HST Notice # 1 www.fin.gov.bc.ca/rev.htm

General Rules
The HST would generally apply to a supply of property by way of lease, licence or similar arrangement for the part of a lease interval that occurs on or after July 1, 2010. The HST would not, however, apply to a supply of property by way of lease, licence or similar arrangement if the lease interval begins before July 2010 and ends before July 31, 2010.
Example 9: A person makes a car lease payment for the lease interval from June 15, 2010 to July 14, 2010. The HST would not apply to the lease payment (regardless of when the payment was made).

Consideration due or paid on or after July 1, 2010:
The HST would generally apply to consideration that becomes due, or is paid without having become due, on or after July 1, 2010 for a supply of property by way of lease, licence or similar arrangement, to the extent that the consideration is for the part of a lease interval that occurs on or after July 1, 2010 (unless the lease interval begins before July 2010 and ends before July 31, 2010).

Consideration due or paid on or after May 1, 2010 and before July 2010:
The HST would generally apply to consideration that becomes due, or is paid without having become due, on or after May 1, 2010 and before July 2010 for a supply of property by way of lease, licence or similar arrangement, to the extent that the consideration is for the part of a lease interval that occurs on or after July 1, 2010 (unless the lease interval begins before July 2010 and ends before July 31, 2010). “

Cases:

A tenant has prepaid for a unit and as of July 1st 2010, has a credit balance to be applied to charges on or after July 1st, 2010.

Case 1 is the easiest to implement. In this case, a tenant has prepaid for the unit past July 1st, 2010 and as of July 1st, has a credit balance.

On June 30th, you’d have to change the tax rate of either/or GST &VAT to the new tax rate.
On July 1st, all the units would bill with the new tax rate and whatever prepayment on the tenant’s account would be properly billed proportionally between rent and the new tax rate. ($100 rent & $13 tax in the case where HST is now 13%).
Every month thereafter, units will continue to bill with the new tax rate and the tenant’s credit would continue to be proportionally applied to the new rent/tax billing at the new rate until the credit is gone.
In this case, you might find you have customers that were paid fully past July 1st, 2010, but now that credit won’t completely cover what was originally expected. For this, you might want to run the report Accounts Receivables/With Positive Balance Due and sort this report by balance due. At the top of the report, you’ll find tenants with a marginal amount due, and that amount would most likely be caused by the increase in tax. Using that report as a guide, you could either contact the tenants, have them remit the difference or discount the tenants’ accounts for any outstanding balances.

A tenant is moved into a unit using a discount plan (flexplan) and within that plan, some or all of the monthly charges occur on or after July 1st, 2010.

Case 2 is a little more cumbersome to implement as it requires a manual billing for the taxes billed on or after July 1st, 2010.

In a scenario where a tenant is billed in or past July, 2010 and has signed a month by month lease, the charges on/after July 1st, 2010 need to have the additional taxes manually billed.

For example, a tenant is moved into a unit on May 15th, 2010 with the deal that they pay for 3 months, they get the 4th free. The unit rent rate is $100 a month.
In this example, when the tenant is moved in, the tenant’s AR History would include the $100 rent and $6 tax (assuming GST is currently 6%) for May, June, July and August. May and June can be left alone, but for the months of July and August, a manual billing to add the increase in HST tax will be required.
Continuing this example, you’d move the tenant in with this discount plan, and just after assigning the unit, you’ll be presented with the AR Actions screen where you can sell inventory, create a manual bill or make a payment.
Select Manual bill.
On the manual billing page, calculate the added HST tax required for the months or July and August. With those calculations, you’d do two manual billings. One effective for July in the amount of $7 (assuming HST is 13%) and the other effective August in the amount of $7.
After these manual billings are in place, accept the payment for the corrected balance.

A tenant is moved into a unit before July 1st, 2010 and the billing period is quarterly, bi-annually or annually.

Case 3 might also be considered an easy solution; at least a solution that doesn’t require much user intervention.

As an example, let’s assume a tenant moves into a unit in June 2010 and the lease period is greater than a one month, such as a yearly lease.
The tenant’s lease period would span from June X, 2010 to June X, 2011.
In other words, the lease began during the month of June 2010 and covers a whole year. When the payment is received in June, it’s applied to a billing effective before the July 1st, 2010 deadline.
Simply move a tenant in using a non-monthly lease and accept the payment at the time of move in.

In addition to the billing cycles, there is the issue of either adding a new billing category called HST or editing the existing billing categories to represent the new HST tax. Here are some suggestions on how to do that. Which option you choose depends on whether you’re using Syrasoft version 7 or Syrasoft version 8. As well, it will also depend on whether you currently use VAT or not.

Regardless of which method below you use, the first thing you want to do if you’re in version 7 is run all the tax reports that you think you’ll need for times prior to July 1st 2010 on June 30th, 2010, as the name of your tax category is going to change from GST to HST and this may cause confusion when running these reports at a later time.
In the case where you’re in version 7 and are not using VAT, Syrasoft would suggest changing your GST to 13% (or whatever the % is for the new HST tax) on June 30th so when the application starts the next day, it charges the correct tax amount.

To change the GST tax:

Go to Company Info in the menu bar
From this menu, select financials setup…
In financials setup, in the lower right, change the GST value to 13 for 13%
Click save
Then, to change the name of your GST, click on Edit in the menu bar
From there, select Billing Categories, then Edit Billing Category…
When the list of Billing Categories comes up, select the Sales Tax category and click Continue.
When the next screen opens, change the Category Description from Sales Tax to HST.

In the case where you’re using version 7 and you are using VAT, Syrasoft suggests making your VAT 0% and changing GST to the entire amount of the HST using the steps provided above.
If you are using version 8 of Syrasoft, the first thing we need to do is create a new billing category for HST tax (it is important that you change this on June 30th, so when the billings start in July, they are including the new tax rate):

Click on Edit in the menu bar.
Click on Tax Codes… from the menu
Once that screen appears, click on the green New button at the top of the page.
After clicking New, the bottom of the page becomes accessible.
At the bottom, put HST in the Description area.
Enter the tax rate (13 = 13%)
Select Sales Tax from the Charge Category dropdown menu.
Click save

Now that you’ve created the tax category, it’s time to assign that new tax code to the taxable billing categories and cancel the old GST and VAT (if applicable). To do this, follow these steps:

Click on Edit in the menu bar.
Click on Charge Categories…
In the Charge Categories on the right, select your Rent Category.
After highlighting Rent, click Edit at top of the screen.
Then, at the bottom section, find the tab that says Taxes Setup and click on it.
In here, remove the checks for your existing tax and check off HST.
From this point forward, when Rent is billed, so too will HST.

Hopefully, you’ll find these suggestions helpful. If you have any additional questions, the following resources may be helpful:

Canadian Ministry of Revenue: www.fin.gov.bc.ca/rev.htm
Canadian Self Storage Association: www.cssa.ca – (888) 898-8538
Syrasoft Technical Support: (800) 559-5942 – www.syrasoft.com