ANS-1649 · SUITETAX & TAX MANAGEMENT

How to Configure Harmonized Sales Tax (HST) in NetSuite for Ontario?

Setting up harmonized sales tax (HST) in NetSuite requires configuring nexuses, subsidiaries, tax codes, and tax groups for accurate tax compliance.

AreaSuiteTax & Tax ManagementAudienceFinance/accounting teamDifficultyIntermediate

Short answer

To configure harmonized taxes in NetSuite, first establish or verify the nexus and assign it to relevant subsidiaries. Create a specific HST tax code for the jurisdiction, like Ontario, then update existing tax groups to incorporate this new code. Finally, adjust tax schedules and conduct a test transaction to ensure accurate tax allocation.

Scenario

Organizations operating in jurisdictions with harmonized sales tax (HST), such as Ontario, Canada, need to ensure their NetSuite environment is correctly configured to calculate and remit these taxes. NetSuite's default tax setups may not include specific HST codes or properly integrate them into existing tax groups, leading to incorrect tax calculations on transactions. This guide addresses the process of establishing and integrating harmonized tax structures within NetSuite.

Solution

  1. Verify the existence of the required tax nexus. If the nexus does not exist, it must be created.

    Path: Setup > Accounting > Nexuses

  2. Pair the newly created or verified nexus with the appropriate subsidiaries. It is crucial to confirm which subsidiaries are required to remit taxes in the specific tax jurisdiction, as a nexus cannot be removed once assigned to a subsidiary. This step can be completed last to allow for confirmation if there is any doubt.

    Path: Setup > Company > Subsidiaries

  3. Create an HST code for the specific jurisdiction, such as Ontario. While NetSuite often presets tax codes upon nexus creation, these must be reviewed and updated for accuracy. NetSuite does not automatically create HST codes, requiring manual creation. Ensure the appropriate rate, tax type, and GL accounts are configured.

    Path: Setup > Accounting > Tax Codes > New

  4. Update the CA-S-ON tax group, as it is not provisioned with the harmonized tax code.

    Path: Setup > Accounting > Tax Groups

    Update the PST tax code to PST ON_0. When using harmonized taxes, the PST rate should be set to 0.

    Update the GST code to point to the HST_ON_13 code created in the previous step.

  5. Update all tax schedules to dictate the tax treatment within the new nexus.

    Path: Setup > Accounting > Tax Schedules

    Example for a taxable tax schedule:

    Example for a non-taxable schedule:

  6. Run a test to ensure that the taxes are set up properly.

    Choose an item with a taxable schedule.

    Choose a client in a subsidiary to which this nexus has been assigned, ensuring they have an address in Ontario.

    Create a sales order with this item, customer, and ship-to address combination, then confirm that the taxes are appropriately allocated.

Originally answered February 10, 2023

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