Filing a GST/HST return is not as simple as copying the tax amount from Shopify into a tax form. It involves making sure that both your Shopify and Quickbooks numbers agree.
Shopify records orders, discounts, refunds, shipping charges and taxes calculated at checkout. These orders are then transferred to Quickbooks to give you a clear financial picture. QuickBooks then records the entries that ultimately support your tax return. However, the transfer from Shopify to Quickbooks can have a lot of issues that may need resolving before filing your GST/HST return.
To help ensure both Shopify and Quickbooks agree, there are 4 reports review. These include the balance sheet, bank reconciliations reports, shopify sales tax report and Quickbooks GST/HST report.
A Shopify store owner may think they have everything they need to file GST/HST after transferring data from Shopify to Quickbooks. However, after reviewing all 4 reports, they may need to make some corrections before filing a return.
The goal of these reports is not to force every report to show the same total. Rather, it is to explain why they differ and confirm the GST/HST return is supported.
This blog will discuss Shopify and QuickBooks reports to compare before filing a GST/HST return.
Shopify Sales Report: Establish the Starting Point
Before filing your Shopify sales tax return, you want to begin with the Shopify sales report for the filing period. Examine gross sales, discounts, returns, net sales, shipping charges and taxes. Use consistent report dates and document any filters. If you also use Shopify tax reporting, review the tax breakdown by jurisdiction and tax type.
As you review the Shopify sales report and sales tax report, you are looking for are any anomalies. Here are some questions to ask yourself as you do your review:
- Was the correct sales tax percent charged for each sale?
- Did I charge sales tax on sales even when I should not have?
- I sold product to a province outside my home province. Should I have charged sales tax?
- Were the appropriate sales tax rate charged for out of province sales?
It is important to note that Shopify calculates taxes based on settings and transaction information. This means the majority of the issues you come across can be fixed through your Shopify settings. However, doing so will only fix issues moving forward. As a result, as you come across issues, jot them down. You may not be able to resolve them via Shopify but you can resolve them in Quickbooks directly.
If you do make corrections and they happen to affect to the period you reviewing, ensure the data is transferred to Quickbooks so you are working with the same data. Remember, you want the data in Quickbooks to match the source data in Shopify as much as possible.
Once you establish a starting point for your data in Shopify, you can move on to reviewing the reports in Quickbooks.
Bank Reconciliation Report: Verify All Transactions Before Preparing HST/GST
Before preparing your HST/GST, you must ensure that all your bank accounts have been reconciled. This is because you need to make sure that all transactions involving HST/GST have been accounted for.
A bank reconciliation proves that the information within your accounting software agrees with the bank statements. This does not exclude what is in your Shopify account either. It also does not prove that the sales and tax classifications are correct. Imagine if you had $10,000 of sales and $300 of processing fees resulting in a $9,700 deposit. Let’s ignore taxes for simplicity. If we booked $9,700 as revenue and reconciled the bank, we may actually be understating sales, expenses, and even taxes.
A bank reconciliation report forces you to go through each transaction in order to match them to a transaction on the statement. This exercise forces you to record or remove any discrepancies between the statement and what is in QuickBooks in order to ensure that your bookkeeping has been completed. A clean bank reconciliation report supports tax review and prepares you for filing your HST/GST sales tax.
QuickBooks GST/HST Report: Review the proposed tax return
Once your transactions are complete and your bank accounts have been reconciled, you’re now ready to run the QuickBooks HST/GST report. Depending on your QuickBooks setup, the GST/HST summary report may be sufficient for this review. Before running the report, check the reporting basis, dates, tax agency, and tax code before relying on the numbers.
This report can be used to compare the QuickBooks taxable sales and tax collected with Shopify sales and tax activities. This allows you to compare and contrast any differences and make adjustments as necessary. For example, if Shopify reports $6,240 of HST after refunds, but QuickBooks reports $6,500, you would need to investigate the $260 difference rather than accepting the software-granted return.
When viewing the purchase side and eligible tax credits, the same level of scrutiny is necessary. For this, you can use the detailed GST/HST report to review bills, expenses, import-related charges, subscriptions, and other purchases with GST/HST. Any amounts that don’t make sense need to be investigated and corrected as necessary.
Look for manual entries to GST/HST accounts, duplicate imports, refunds without corresponding tax reversals and transactions coded to the wrong tax authority. Confirm that adjustments from earlier periods have been handled appropriately. A plausible amount owing is not always evidence that the transaction detail is correct.
Balance Sheet: Reoncile the GST/HST Liability
The balance sheet is the last report to check to tie it all together. The amount on the balance sheet for the period you’re filing HST/GST for should match with the amount on your QuickBooks GST/HST summary report. If they don’t match, there is usually 1 of 2 reasons why:
- You have not yet paid GST/HST for a previous periods or you’ve paid but the payment will clear in a future period
- GST/HST you filed for a previous period may have been altered
These reasons for a mismatch need to be carefully examined and corrected as needed before finalizing your HST/GST report. Once corrected however, you will have everything you need to file your Shopify HST/GST sales tax.
A Repeatable Four-report GST/HST Checklist
- First, save the Shopify sales and tax reports for the filing period, with the filters and reporting dates visible.
- Reconcile the tax reports to balance-sheet liability accounts. Also make sure all bank accounts are reconciled.
- Run QuickBooks GST/HST summary and detailed transaction reports for the same period. Prepare a bridge explaining differences in sales, discounts, refunds, tax and non-Shopify activity.
- Match the Quickbooks GST/HST report with your balance sheet liability.
- Finally, investigate every material unexplained discrepancy before submitting the return.
- Preserve the reports, working papers and supporting invoices. If a previous return was incorrect, determine the proper correction method rather than silently burying the difference in a later period.
When to get bookkeeping help
If your Shopify sales and QuickBooks GST/HST reports never agree, your payment clearing balance keeps growing, or you cannot explain the tax liability on the balance sheet, the issue may be your bookkeeping workflow rather than the filing form. A bookkeeper familiar with ecommerce can map transactions correctly, reconcile settlements and prepare clear schedules for tax filing.
For Canadian Shopify stores handling substantial order volume, a repeatable monthly close is more useful than a frantic quarterly or annual cleanup. The objective is not to make four reports look identical. It is to make the relationship between them clear, supported and reliable.
Trusted sources
- CRA — GST/HST for businesses: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses.html
- CRA — GST/HST Registrants Guide RC4022: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4022.html
- Shopify — Analytics and reports: https://help.shopify.com/en/manual/reports-and-analytics/shopify-reports
- Shopify — Taxes: https://help.shopify.com/en/manual/taxes
- QuickBooks Canada: https://quickbooks.intuit.com/ca/