Monthly Archives: June 2012

New PST Rules Affecting Estheticians, Spas, Laser Services, Hair Salons

Are you a Winnipeg business owner of a hair salon, spa, cosmetic clinic or the like? If so, there are some major changes to the way RST (also known as PST) is to be charged to your clients for specific services. If you think you may be affected, then read on!

Effective July 1, 2012, sales tax will apply on the following personal services: spa treatments, non-medical skin and nail services (such as manicures, pedicures and facials), tattooing, piercing, and hair services (including hair removal and augmentation, hairstyling, haircuts and barber services).

Haircuts costing no more than $50 will continue to be exempt from sales tax. Note that there are very specific rules for when you should and should not charge RST on haircuts when combined with other services. Please contact the staff at Five Star Accounting if you have any questions!

Also, if you use certain supplies for services to your clients then read on to learn about changes which could save your company from paying unnecessary RST on supplies soon to be exempt.

The following is taken from the Province of Manitoba website.  Be sure to check out the website for more details.

Exempt goods purchased for use in providing a taxable service

• Effective July 1, 2012, goods applied directly to a customer and consumed completely in the performance of a taxable personal service can be purchased RST exempt by the service provider. Examples include shampoo, soap, skin care products, nail polish, make-up, tattoo ink, body ornaments supplied with piercing services etc. Businesses can buy these goods exempt by providing their supplier with their seven-digit Manitoba RST number.

Taxable goods for own use
• Businesses are required to pay RST on all purchases of equipment, supplies and taxable services acquired for their own use in operating their business. Examples are service equipment (e.g. salon beds and furniture, styling stations, wash units, hair dryers, carts, trolleys, laser equipment, tanning beds), accessories (towels, basins, scissors, razors, brushes, makeup applicators) office equipment, signs, brochures, forms and other stationery, computer software, promotional items, uniforms, building cleaning supplies, accounting services and equipment repair services.

Lastly, have you sold any prepaid services? No worries. These are exempt from RST. This would then be an ideal time to push those spa packages!

If you need any help or assistance interpreting the new RST rules, the team at Five Star Accounting is here to help!

Types of Corporations in Canada Influences the Tax Paid

In Canada, there are two types of corporations. The first type is the corporation created under federal law, and the second type is the corporation formed under the provincial laws of the provinces and territories. Typically the federal form is preferred because it allows business operations across the country and the statutes controlling the corporation are consistent. The province and territory statutes vary quite a bit concerning issues like the rights of minority shareholders, internal governance, financial recourses and soon.

When you start a business, there are basically three business structures to choose from: sole proprietorship, partnership or incorporation. There is a fourth form called a cooperative, but it’s a very specialized and uncommon business form. The choice of business form influences the types of deductions you are allowed to take. Incorporation is often chosen because it can allow you to maximize the benefits of expense deductions while limiting personal liability.

There are several corporation types in Canada as summarized below:

• Canadian-Controlled Private Corporation (CCPC) – resident in Canada and is not controlled by corporation(s) or person(s) outside of Canada.

• Private Corporation – resident in Canada, not a public corporation, and not controlled by one or more public corporations

• Public Corporation – resident in Canada and meets requirements for listing of shares on the stock exchange or elects to be designated as public under Regulation 4800(1)

• Other Corporation – corporation form that doesn’t fall within the other 3 types of corporations

The advantages of incorporating include limited liability, ongoing operations with transferable ownership, easier to raise capital, possible tax deferral and lower tax rates. For any of these reasons, sole proprietors may choose to incorporate. For example, the Canadian-Controlled Private Corporation eligible for a small business deduction will currently pay a net federal tax rate of 11 percent which may be much lower than a personal income rate.

Corporations are also able to deduct all operating expenses while sole proprietorships face limitations. This gives you much leeway in terms of controlling the tax you will owe. For example, corporations can pay out profits to its management and staff turning what would be taxable profit into a deductible expense. A sole proprietor would have to pay all the tax due on business profit and personal income. In addition, any legitimate and legal expense incurred to operate the corporation is deductible, while it may be more difficult to separate personal from business expenses in a sole proprietorship.

It’s important to make sure you are getting all possible tax deductions on a business. The business structure you choose makes the difference on the type and amount of those deductions in addition to the tax rate paid.

Helping Small Business Owners Succeed

As a small business owner, you’re often required to fill multiple roles in order to ensure your business’ success. You’re often pulled in so many different directions it’s hard for you to concentrate on what you love doing most, the reason why you decided to open your own business in the first place.

At Five Star Accounting, we are a team of experienced accounting and bookkeeping professionals who are passionate about what we do.  With our combined experience in the small business environment, we understand the unique demands of small business owners. We can help you with your small business bookkeeping and accounting requirements so that you can concentrate on what you are most passionate about.

Don’t Go Down in Flames! Avoiding Burnout in the Small Business

Wow! How did you forget to update the new maximum pensionable earnings amount in the payroll system effective January 1, 2012? Was it because you were too busy trying to catch up with the bookkeeping? And when did the mileage rate go up for employees using their personal vehicles to make business deliveries? Perhaps it was when you were driving around town to meet with potential clients, since business growth depends on your networking abilities.

If these scenarios sound familiar then you’re on the path to small business owner burnout. One of the first symptoms to appear is stress from filling multiple roles as owner, employee supervisor, customer service representative, bookkeeper, manager, purchasing director, marketing director, salesperson and human resources director. Another common symptom is important tasks not getting done in a timely manner or not getting done at all. For example, a frantic order is placed with a supplier – maybe not at the best price, either – because the business is about to run out of essential supplies.

The Business Finances – Get Reports Monthly not just Yearly!

As a small business owner, one of the most alarming symptoms is having no idea how the business is doing financially. Sure, you may keep a close eye on the bank balance but do you know if you were profitable over last quarter or even the last month? You need regular financial statements to help you navigate your business decisions. Perhaps they haven’t been printed because the accounting software needs updating, there’s a backlog of postings and account balancing to clear up, and you have no idea how to record the purchase of the new equipment as a depreciable asset. So unfortunately, you remain oblivious as to how your business is operating financially on a regular basis.  One of the first facts you need to realize as a small business owner is that buying accounting software doesn’t turn you into a bookkeeper or accountant. The power of the accounting software is often not even utilized by entrepreneurs because often they don’t know how to create and interpret management reports. These reports can help the business owner manage the business better, smarter and more efficiently.

Don’t Succumb to Wearing “Too Many Hats”

One danger sign of a business owner unable to manage business growth is when he or she believes no one else is qualified to do certain jobs. This individual then keeps taking on more and more work – wearing too many different hats. Instead of working smarter, the owner works harder and in the process falls behind. A better approach is to identify your strong skills and then determine the work that can be outsourced to professionals. Outsourcing your bookkeeping and accounting to a company such as Five Star Accounting is a good place to start because a professional can ensure the business records are kept current and that you have the financial information needed to grow the business. It’s hard to grow when you’re always looking back at work that should have been done already.

Five Star Accounting offers expertise in small business financial management.

The staff can assist by relieving you of the detailed recording and reporting, ensuring records are maintained according to accounting standards, preparing accurate financial and cash flow statements, and meeting government reporting requirements in a timely manner. Instead of counting receipts, you can spend your time strategically managing business growth and achieving financial goals. And who knows – you may just be able to make the next family birthday party or take a Sunday off to rest. The only flames you should be looking at are in the barbeque. Doesn’t that sound so much more delightful than burnout?