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GST/HST — net tax refund approved

My client ran a small bakery near Toronto. Because most of its sales were zero-rated as groceries, the bakery paid more in HST than it collected. It claimed a refund for its first year of over $13,000. The CRA did its standard "prepayment audit" and asked for numerous documents, including an explanation of why the company was claiming refunds.

The company's outside bookkeeper was going to send in some documents, but they were not well organized and I knew the auditor would not be satisfied. I worked with the company to produce new and clear spreadsheets from its cash register tapes, and to collect other documentation that would show the company's records were well-kept.

I wrote to the CRA prepayment auditor (called a "GST/HST Refund Integrity Officer") to explain in detail why the company did not collect HST on most of its sales, why it collected only 5% instead of 13% on others, and enclosed the spreadsheet and other supporting documents.

The auditor asked for further verification in the form of a few days of cash-register tape summaries, and then was satisfied and approved the refund.

Aside from ensuring my client got its refund, my approach avoided the CRA expanding the audit into a more detailed audit of the client's business, which it would have done if it had received the disorganized answers and documents the company was going to send it.

Problem solved!

(2014)