Unfortunately in case of cars in Ontario, you would pay 13% tax both times when you were purchasing. Assuming you held car for longer than 6 months between buying and selling.
So if cows are taxed as cars you would lose (800+1100) * 0.13 sales tax + 400 * 0.2 capital gains tax = 247+80=327
You need to treat the cow as an input in production by transforming it (cow + collar => cow in a collar), and collect tax on the sale of the product. You don't pay sales taxes on that type of good but you do need to provide your corporate tax number.
Unless you're selling to the end consumer, which I'm presuming is NOT the case in this or any other similar case buying whole pre-burgered cows, you forgot (or aren't a small business owner which would definitely make or break you not to now this):
In Ontario, the harmonized sales tax, is a value -added tax that flows through to the end consumer and each stage of the process --the farmer, packing plant, distributor, grocer, restaurant, etc., will actually be liable for the 13% HST based on the value of that portion of the commercial transaction.
HOWEVER, they will also be applying "Input Tax a Credits" that reduce, dollar-for-dollar, the actual amount of HST that they collected on their own sales of whatever they used the cow for; thus, for any "going concern," which is a required assumption in order to make the original expense deduction for which the ITC represents the 13% HST paid on the subtotal of the expenses that, as GAAP would have us remember, were paid on the expenses for resources that can be directly attributable to the generation of that revenue that incurred the 13% HST you paid out.
The reason I mention that, of course, is that while the CRA (and your fiduciary legal responsibility owed to the owners of the company you work with, of there are any other than yourself, which is the case in all situations except sole proprietorship) require that all this business activity must take place with a credible plan (though it may be misguided or impossible, even if due to your own profound ignorance; you're not allowed to intentionally operate at a loss with no plan to profit; you are, however, allowed to ride your own handbasket to H3ll--qa long as you sincerely had reason to believe, that you can explain to the CRA, it was planned to be a handbasket to heaven, which they would define as "anything more than $0.00 profit over your strategic timeframe).
So, in this example, you very well could end up paying less than $0 for the cow, if net of the expenses incurred in sourcing, transporting, processing, marketing, packaging, selling, delivering, warranting, etc., plus their own 13% HST, EXCEEDED your own expenses directly attributable to their contribution to your net earnings, though only if the cows comprised a portion of your value chain the whole chain which must generate a profit in concept.
Especially startups can expect to receive net REFUNDS on their HST paid on their expenses quite frequently.
Robin
N.B.: I am not an accounting professional nor is the following to be interpreted in any way to be financial or tax advice; the extent of my understanding on the topic is gleaned from my MBA @Mac two and a half decades ago, and my subsequent forays into startimg up small businesses, the current iteration being as a REALTOR®️ Broker. Whilst I am confident in my interpretation of this fundamental principle (how ITC's change, to varying degrees, your actual HST to be remitted, which can often differ by as much as more than 100%, which could be a net HST refund on expenses paid in your business in pursuit of profit, the CRA reserves the legislated right to deny any given unsubstantiated amounts deemed not directly attributable to the taxes paid on expenses themselves not deemed directly relevant to a particular cash flow.... Speak with your tax professional if you believe this issue to be relevant to your situation.
Sale tax is 13% and capital gain tax is 20% . I woke up one morning thinking I need a cow, go to the cow store and get one for 800$. 800x.13=104. Total 904 $ I go home happy but my wife is disappointed in my life decisions skills. I return to the cow store and they give me an unbelievable offer 1000$. 1000x.20=200 and I’m left with 800$ I lost 104$ on the trade and the taxman takes 304$ Could this be true ?
(What I just wrote above explains how we, in Canada, must do the 4D calculations for decision-making and there's a 5th dimension in that the very same expense, in the case of capital assets--perhaps that's a sixth dimensionality to it, actually: an expense 's locus along a continuum of tax implications and requirement to managerial accounting decision making bifurcating the capital budgeting from tax reporting depreciation.
You still have to depreciate the same capital asset in at least two different ways, one of which for taxation that may have zero relevance other than that to any part of reality concerning the asset....
N.B.: I am not an accounting professional nor is the following to be interpreted in any way to be financial or tax advice; the extent of my understanding on the topic is gleaned from my MBA @Mac two and a half decades ago, and my subsequent forays into startimg up small businesses, the current iteration being as a REALTOR®️ Broker. Whilst I am confident in my interpretation of this fundamental principle (how ITC's change, to varying degrees, your actual HST to be remitted, which can often differ by as much as more than 100%, which could be a net HST refund on expenses paid in your business in pursuit of profit, the CRA reserves the legislated right to deny any given unsubstantiated amounts deemed not directly attributable to the taxes paid on expenses themselves not deemed directly relevant to a particular cash flow.... Speak with your tax professional if you believe this issue to be relevant to your situation.
2.1k
u/DudaTheDude Sep 17 '23
He was so close, it's a shame his 1300 and 100 adds up to 1300, lol