SOLUTIONS MANUAL
Volume 2 (Chapter 11-21)
Gary Donell
Byrd & Chen’s Canadian Tax
Principles
2025-26 Edition
Gary Donell
This is the Only Original Solutions Manual for 2025-2026 Edition, Volume 2
(Chapter 11-21). All other Files in the Market are Fake/Old/Wrong Edition.
All Chapters are Arranged Reverse: Chapter 21-11
, Instructor’s Solutions Manual, Byrd & Chen’s Canadian Tax Principles 2025/26 Edition
Chapter 21 Instructor’s Solutions Manual
Answers to Quick Review Questions
1. A. The three supply categories are represented by (b), (c), and (d).
2. G
3. C. Child care services are exempt supplies; a hobby is not a commercial activity since
there is no reasonable expectation of a profit; an employee bonus is excluded from qualifying
as “commercial activity.”
4. C
5. B
6. B
7. D. A participating province is one that has merged its provincial sales tax with the GST,
resulting in the HST. None of the three territories are participating.
8. C. These basic grocery items are zero-rated goods and services where the GST or HST
rate is 0%.
9. D. Insurance policies are considered a financial service, which is an exempt supply.
10. E. These are grocery items that are not considered basic groceries but are fully taxable
supplies.
Solutions to Assignment Problems
Solution to AP 21-1
GST Calculation
Under the normal GST system, a 5% tax is applied to the selling price at each stage of the supply
and distribution chain and the business would be entitled to an input tax credit (ITC) for the tax paid
on purchases. The net result is that all payments of GST by vendors are refunded as ITCs by the
purchaser with the exception of the ultimate consumer. As a result, there is no net out-of-pocket
cost (other than administration) to vendors from the GST.
Selling GST ITC
Vendor Cost Price Charged Claimed
Raw Materials Supplier $ 250 $ 12.50 Nil
Manufacturer $ 250 350 17.50 $12.50
Copyright © 2026 Pearson Education Inc. 21-1
, Instructor’s Solutions Manual, Byrd & Chen’s Canadian Tax Principles 2025/26 Edition
Wholesaler 350 490 24.50 17.50
Distributor 490 686 34.30 24.50
Retailer 686 960.40 48.02 34.30
Totals $1,776 $2,736.40 $136.82 $88.80
The net GST charged from the raw materials supplier through to the consumer is $48.02 ($136.82 –
$88.80). The consumer bears the full cost of the tax by paying GST of $48.02 [(5%)($960.40)]
since there is no opportunity for an ITC.
Turnover Tax Calculation
The turnover tax is similar to the GST, as it applies to revenue. However, the turnover tax is
significantly different as there is no ITC for tax paid at each stage of the supply and distribution
chain on purchases. The tax is passed on to each of the purchasers in the chain, resulting in
multiple layers of the tax. Because of the multiple times goods are taxed, to raise the same
amount of tax revenue, the turnover tax rate would be 1.755% ($48.02 ÷ $2,736.40).
Solution to AP 21-2
Analytical Guidance: A person carrying on a business is exempt from the GST if the person is a
small supplier. A small supplier generally means a business in which the sales from taxable
supplies (including zero-rated goods) are $30,000 or less in any single calendar quarter or in the
last four consecutive calendar quarters. The loss of small supplier status determines both the time
in which GST must begin to be collected and the time in which registration with the CRA is
required.
If small supplier status is lost because of a single calendar quarter exceeding $30,000, the ETA
requires the GST to be collected on the sale that caused that threshold to be exceeded and every
subsequent sale transaction. Registration with the CRA is required within 29 days of the date of
the sale transaction that resulted in the $30,000 threshold being exceeded.
If small supplier status is lost because taxable sales from four consecutive calendar quarters
exceeds $30,000, then the small supplier status continues until the end of the first month following
the fourth quarter or the latest calendar quarter if the business has been in existence for less than
one year. GST must be collected on the first and subsequent sales after the one-month extension.
Registration must take place within 29 days of the date of that first sale.
Note: When both the single calendar quarter method and the four consecutive calendar quarter
method apply, it is the one that causes the earliest loss of small supplier threshold status that will
determine the outcome. If the $30,000 is exceeded in a quarter that is part of the four preceding
consecutive calendar quarters the single quarter test will apply.
Situation 1: The first calendar quarter of 2026 represents a single calendar quarter that exceeds
$30,000, and the four consecutive quarters of 2025 also exceed $30,000 with a combined total
of$52,900 [$6,200 + $9,000 + $10,200 + $27,500]. Since the taxable sales are earned evenly
throughout the first quarter of 2026 we can estimate that the $30,000 level was not exceeded until
March of 2026. The four consecutive quarter test, however, would result in the business losing
small supplier status as of the end of the month following the four consecutive calendar quarters,
which is January 31, 2026. Since that is the earliest of the two methods the four calendar quarter
test is applied to determine the GST result.
The results are:
Small supplier status lost: January 31, 2026 (four consecutive calendar quarter test)
Copyright © 2026 Pearson Education Inc. 21-2
, Instructor’s Solutions Manual, Byrd & Chen’s Canadian Tax Principles 2025/26 Edition
GST Collection to begin: February 3, 2026 (first sale after loss of status)
GST Registration required: March 4, 2026 (29th day after the first taxable sale)
Situation 2: In this situation the single calendar quarter test applies since the loss of the small
supplier status occurs at the time of the $32,000 sales transaction on January 1, 2026. As in
Situation 1, the four calendar quarter test would have resulted in the loss of small supplier status
January 31, 2026.
The results are:
Small supplier status lost: January 1, 2026 (Single calendar quarter test)
GST Collection to begin: January 1, 2026 (sale that caused the loss of status)
GST Registration required: January 30, 2026 (29th day after the sale that caused the loss of
status)
Situation 3: In this situation the four consecutive calendar quarters test for all of the quarters of
2025 equals $62,900. This results in the loss of the small supplier status on January 31, 2026.
However, the single calendar quarter test applies to the fourth quarter of 2025. This means that
the small supplier status is lost on the date of the sales transaction that caused the $30,000 limit
to be exceeded in that quarter. Since this is the earliest date on which the small supplier status is
lost, the single calendar quarter test applies.
The results are:
Small supplier status lost: December 14, 2025 (Single calendar quarter test)
GST Collection to begin: December 14, 2025 (sale that caused the loss of status)
GST Registration required: January 12, 2026 (29th day after the sale that caused the loss of
status)
Solution to AP 21-3
A. Total sales in the second quarter of 2025 (April to June) totaled $31,670, which exceeds
the $30,000 threshold limit. As a result, the date of the sale that caused the threshold to
be exceeded is the date when GST must be collected. This specific date, which occurred
sometime in June, is important for two reasons: (1) Martin now has 29 days from that date
to register for the GST, and (2) Martin is required to charge GST on all sales beginning
with the sale that caused the $30,000 threshold to be exceeded.
B. Both the GST return and the payment are due one month after the end of the applicable
quarter. The quarterly remittances for 2025 would be calculated as follows:
GST Taxable GST At
Quarter Quarterly Sales 5% Due Date
January to March Nil N/A
April to June 1,670* 83.50 July 31, 2025
July to September 46,020 2,301.00 Oct. 31, 2025
October to December 56,910 2,845.50 Jan. 31, 2026
*This is the amount in excess of $30,000 for the second quarter.
Copyright © 2026 Pearson Education Inc. 21-3
Volume 2 (Chapter 11-21)
Gary Donell
Byrd & Chen’s Canadian Tax
Principles
2025-26 Edition
Gary Donell
This is the Only Original Solutions Manual for 2025-2026 Edition, Volume 2
(Chapter 11-21). All other Files in the Market are Fake/Old/Wrong Edition.
All Chapters are Arranged Reverse: Chapter 21-11
, Instructor’s Solutions Manual, Byrd & Chen’s Canadian Tax Principles 2025/26 Edition
Chapter 21 Instructor’s Solutions Manual
Answers to Quick Review Questions
1. A. The three supply categories are represented by (b), (c), and (d).
2. G
3. C. Child care services are exempt supplies; a hobby is not a commercial activity since
there is no reasonable expectation of a profit; an employee bonus is excluded from qualifying
as “commercial activity.”
4. C
5. B
6. B
7. D. A participating province is one that has merged its provincial sales tax with the GST,
resulting in the HST. None of the three territories are participating.
8. C. These basic grocery items are zero-rated goods and services where the GST or HST
rate is 0%.
9. D. Insurance policies are considered a financial service, which is an exempt supply.
10. E. These are grocery items that are not considered basic groceries but are fully taxable
supplies.
Solutions to Assignment Problems
Solution to AP 21-1
GST Calculation
Under the normal GST system, a 5% tax is applied to the selling price at each stage of the supply
and distribution chain and the business would be entitled to an input tax credit (ITC) for the tax paid
on purchases. The net result is that all payments of GST by vendors are refunded as ITCs by the
purchaser with the exception of the ultimate consumer. As a result, there is no net out-of-pocket
cost (other than administration) to vendors from the GST.
Selling GST ITC
Vendor Cost Price Charged Claimed
Raw Materials Supplier $ 250 $ 12.50 Nil
Manufacturer $ 250 350 17.50 $12.50
Copyright © 2026 Pearson Education Inc. 21-1
, Instructor’s Solutions Manual, Byrd & Chen’s Canadian Tax Principles 2025/26 Edition
Wholesaler 350 490 24.50 17.50
Distributor 490 686 34.30 24.50
Retailer 686 960.40 48.02 34.30
Totals $1,776 $2,736.40 $136.82 $88.80
The net GST charged from the raw materials supplier through to the consumer is $48.02 ($136.82 –
$88.80). The consumer bears the full cost of the tax by paying GST of $48.02 [(5%)($960.40)]
since there is no opportunity for an ITC.
Turnover Tax Calculation
The turnover tax is similar to the GST, as it applies to revenue. However, the turnover tax is
significantly different as there is no ITC for tax paid at each stage of the supply and distribution
chain on purchases. The tax is passed on to each of the purchasers in the chain, resulting in
multiple layers of the tax. Because of the multiple times goods are taxed, to raise the same
amount of tax revenue, the turnover tax rate would be 1.755% ($48.02 ÷ $2,736.40).
Solution to AP 21-2
Analytical Guidance: A person carrying on a business is exempt from the GST if the person is a
small supplier. A small supplier generally means a business in which the sales from taxable
supplies (including zero-rated goods) are $30,000 or less in any single calendar quarter or in the
last four consecutive calendar quarters. The loss of small supplier status determines both the time
in which GST must begin to be collected and the time in which registration with the CRA is
required.
If small supplier status is lost because of a single calendar quarter exceeding $30,000, the ETA
requires the GST to be collected on the sale that caused that threshold to be exceeded and every
subsequent sale transaction. Registration with the CRA is required within 29 days of the date of
the sale transaction that resulted in the $30,000 threshold being exceeded.
If small supplier status is lost because taxable sales from four consecutive calendar quarters
exceeds $30,000, then the small supplier status continues until the end of the first month following
the fourth quarter or the latest calendar quarter if the business has been in existence for less than
one year. GST must be collected on the first and subsequent sales after the one-month extension.
Registration must take place within 29 days of the date of that first sale.
Note: When both the single calendar quarter method and the four consecutive calendar quarter
method apply, it is the one that causes the earliest loss of small supplier threshold status that will
determine the outcome. If the $30,000 is exceeded in a quarter that is part of the four preceding
consecutive calendar quarters the single quarter test will apply.
Situation 1: The first calendar quarter of 2026 represents a single calendar quarter that exceeds
$30,000, and the four consecutive quarters of 2025 also exceed $30,000 with a combined total
of$52,900 [$6,200 + $9,000 + $10,200 + $27,500]. Since the taxable sales are earned evenly
throughout the first quarter of 2026 we can estimate that the $30,000 level was not exceeded until
March of 2026. The four consecutive quarter test, however, would result in the business losing
small supplier status as of the end of the month following the four consecutive calendar quarters,
which is January 31, 2026. Since that is the earliest of the two methods the four calendar quarter
test is applied to determine the GST result.
The results are:
Small supplier status lost: January 31, 2026 (four consecutive calendar quarter test)
Copyright © 2026 Pearson Education Inc. 21-2
, Instructor’s Solutions Manual, Byrd & Chen’s Canadian Tax Principles 2025/26 Edition
GST Collection to begin: February 3, 2026 (first sale after loss of status)
GST Registration required: March 4, 2026 (29th day after the first taxable sale)
Situation 2: In this situation the single calendar quarter test applies since the loss of the small
supplier status occurs at the time of the $32,000 sales transaction on January 1, 2026. As in
Situation 1, the four calendar quarter test would have resulted in the loss of small supplier status
January 31, 2026.
The results are:
Small supplier status lost: January 1, 2026 (Single calendar quarter test)
GST Collection to begin: January 1, 2026 (sale that caused the loss of status)
GST Registration required: January 30, 2026 (29th day after the sale that caused the loss of
status)
Situation 3: In this situation the four consecutive calendar quarters test for all of the quarters of
2025 equals $62,900. This results in the loss of the small supplier status on January 31, 2026.
However, the single calendar quarter test applies to the fourth quarter of 2025. This means that
the small supplier status is lost on the date of the sales transaction that caused the $30,000 limit
to be exceeded in that quarter. Since this is the earliest date on which the small supplier status is
lost, the single calendar quarter test applies.
The results are:
Small supplier status lost: December 14, 2025 (Single calendar quarter test)
GST Collection to begin: December 14, 2025 (sale that caused the loss of status)
GST Registration required: January 12, 2026 (29th day after the sale that caused the loss of
status)
Solution to AP 21-3
A. Total sales in the second quarter of 2025 (April to June) totaled $31,670, which exceeds
the $30,000 threshold limit. As a result, the date of the sale that caused the threshold to
be exceeded is the date when GST must be collected. This specific date, which occurred
sometime in June, is important for two reasons: (1) Martin now has 29 days from that date
to register for the GST, and (2) Martin is required to charge GST on all sales beginning
with the sale that caused the $30,000 threshold to be exceeded.
B. Both the GST return and the payment are due one month after the end of the applicable
quarter. The quarterly remittances for 2025 would be calculated as follows:
GST Taxable GST At
Quarter Quarterly Sales 5% Due Date
January to March Nil N/A
April to June 1,670* 83.50 July 31, 2025
July to September 46,020 2,301.00 Oct. 31, 2025
October to December 56,910 2,845.50 Jan. 31, 2026
*This is the amount in excess of $30,000 for the second quarter.
Copyright © 2026 Pearson Education Inc. 21-3
