Purchases made on a credit card can use factors to simplify the calculation of ITCs.

The CRA allows a registrant who is an employer, partnership, charity or public institution to use factors to calculate ITCs in respect of the tax deemed paid by the registrant on purchases made by the registrant’s employees, partnership members or volunteers where credit cards have been used to make purchases.

The use of factors is intended to simplify the administrative burden registrants have because credit card receipts are often a one sum total and include gratuities, PST, QST, etc. The use of a factor simplifies the process of claiming ITCs for business on these types of business expenses. This is an administrative policy of the CRA and is not legislated. The choice of the factor method is an option for a registrant. Some registrants may prefer to use the exact calculation method.

Effective July 1, 2010, Ontario will become a participating province with an HST rate of 13%. As of that date, the factor allowed for HST in Ontario will be 12/112