Practical Advice to Save Money and Stay Compliant
Running a pharmacy isn’t just about filling prescriptions and managing inventory—it’s also about keeping your finances in check. With tax season around the corner, pharmacy owners often find themselves buried under paperwork, trying to navigate GST/HST regulations, deductions, and credits. But don’t worry, we’ve got your back! Here are five straightforward tax tips for pharmacies designed to help you save money, stay compliant, and run your business smoothly.
Pharmacy Accounting: Tax Tips for Pharmacies
1. Know Your GST/HST Inside and Out
GST/HST can be tricky for pharmacies because not all products are taxed equally. While prescription medications are exempt from GST/HST, over-the-counter (OTC) medications, health supplements, and certain supplies are often taxable.
Quick Tip:
- Ensure your pharmacy is properly applying the tax rules. Consult with a professional to separate taxable and non-taxable goods in your accounting system.
- Pay attention to the provincial differences in HST/GST rates if your pharmacy operates in more than one province.
- Keep accurate records of sales tax collected on taxable items and claim input tax credits (ITCs) for the GST/HST you paid on business expenses.
2. Don’t Miss Out on Pharmacy-Specific Deductions
Inventory is one of your biggest expenses, and it’s also one of the most significant tax deductions you can claim. Whether it’s medication costs, storage equipment, or packaging supplies, these costs can add up—and they’re all deductible.
Quick Tip:
- Track your inventory meticulously to calculate your Cost of Goods Sold (COGS) accurately.
- Choose the right inventory accounting method (periodic or perpetual) based on your pharmacy’s operations.
3. Take Advantage of Tax Credits
As a pharmacy owner, you might qualify for valuable tax credits that could save you thousands of dollars. From the Small Business Deduction to credits for research and development, there are options worth exploring.
Quick Tip:
- Claim the Small Business Deduction if your pharmacy qualifies.
- If you’re involved in developing healthcare solutions, explore Scientific Research and Experimental Development (SR&ED) tax credits.
- Keep detailed records of all deductible expenses, including marketing costs, wages, and insurance.
Need help maximizing your tax credits? Our team specializes in tax planning for pharmacies to ensure no opportunity is missed.
4. Manage Employee Benefits Smartly
Employee benefits are a great way to attract and retain staff, but they can also have tax implications if not managed properly. Benefits like health insurance and staff discounts need to be classified correctly.
Quick Tip:
- Clearly distinguish between taxable benefits (e.g., staff discounts) and non-taxable benefits (e.g., health insurance).
- Accurately report taxable benefits on employee T4 slips.
5. Plan Ahead for Year-End Taxes
Year-end tax planning isn’t something to leave until the last minute. With a bit of preparation, you can minimize your tax burden and avoid unnecessary stress.
Quick Tip:
- Consider the split of your income between Dividend and Salary.
- Maximize contributions to your RRSP (Registered Retirement Savings Plan) for tax advantages.
- Review your financial statements regularly with an accountant.
Final Thoughts: Get Expert Pharmacy Accounting Support
Pharmacy taxes are complex, but you don’t have to navigate them alone. Contact an accountant specializing in pharmacy accounting, who can offer tailored solutions for everything from GST/HST compliance to tax planning for healthcare businesses.
Ready to simplify your pharmacy taxes? Book a free consultation with us today and experience stress-free financial management tailored to your pharmacy business!
Let us handle the numbers so you can focus on what you do best—running your pharmacy.
