It is now later on September 18, 2020. You have just returned from your meeting with Senior

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Question:

It is now later on September 18, 2020. You have just returned from your meeting with Senior Partner. Now Francesca Vitello, the partner in charge of the Our Town Drug Mart Limited (“Our Town”) engagement, has dropped into your office to ask some questions about CCA, and express some concerns in respect of GST/HST compliance for Our Town’s December 31, 2020 taxation year. Our Town has been in business for a number of years, but is a new client to the firm.

Francesca told you some basic background information on the company.

“Our Town is a CCPC 100% owned by Bill Harwood, a pharmacist, and is a retail pharmacy. Our Town is located in Toronto, Ontario. I understand that gross revenue is about $1.5M per year. Besides the prescriptions it fills and sells, it sells over-the-counter (non-prescription) medications, vitamins and supplements, toiletries, household products, cosmetics, and other “beauty products”. It also has a “grocery” section of the store that sells food products – milk, eggs, bread, canned goods (and similar items), as well candy, cookies, chips, and pop. Think Shoppers Drug Mart and you will get the idea of the store’s offering. By the way, it also provides free delivery for prescriptions.”

Francesca went on to ask her CCA questions:

“Our Town has made some capital purchases 2020. With all the changes to the CCA rules over the past couple of years, I want to make sure I am not misleading Bill when I tell him how much he can write off for tax purposes. Our Town purchased some fancy display cases for displaying high-end cosmetic and perfume gift sets to get ready for the holiday gift season. They also bought a new computer printer for the dispensary as well as a hybrid car for making the deliveries. The car dealership told Bill that the car is a “zero-emission passenger vehicle”, whatever that is. Can you provide me with a summary of which CCA class each of these items goes into and explain the maximum amount of the purchase price Our Town will be able to write off this year as CCA? I don’t have the dollar amounts of the purchases from Bill yet, but if you can give me an explanation, I can take it from there.”

Francesca also discussed GST/HST.

“Our Town is a GST/HST registrant. Bill’s wife prepares and files the GST/HST returns. As Our Town is a new client, I want to review their returns and make sure they are doing them properly. I find that so many clients who prepare their own returns really don’t understand what they are doing! It would be helpful to provide a summary of how the revenue streams are categorized for GST/HST purposes and what that means for GST/HST filings. Also, provide an explanation of how input tax credits should be determined. I also want to know their options for methods of filing and filing frequency.”

On her way out the door Francesca said:

“Thanks. I would like a summary of this Monday, please. A chart is fine.”

You are going to have a busy weekend!