Income Tax

What is Margin and Affect on Income Tax

What is meant by Margin on a business financial statement and how it affects income tax.

Margin is gross revenue less cost of goods sold. (COGS)

Gross revenue is revenue before any expenses and cost of goods deducted.

Cost of goods sold is the product purchased for the purpose of selling that product.

Now that we have an idea of what gross revenue and COGS is, let’s continue to figure out the margin.


Gross revenue                    $250,000.

Less: Discount                      $50,000.

Total Gross Revenue           $200,000.


Less: Cost of Goods Sold     $100,000.


Total Gross Revenue           $100,000. this is the margin (revenue less COGS)


Wages               $30,000.

Heat                     1500.

Rent                   15,000.

Total Expenses    $46,500.

Net Income         $53,500. This is your net income and taxable income.

You need to have a healthy margin so the business can pay for overhead expenses such as rent, heat, wages etc and pay you, the business owner as well.



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Running a Business and Income Tax

Running a business and income tax.

If your thinking of starting a business, you should know the different tax liabilities that affects your business. Even if you think you know what needs to be done before starting your business, speaking to an accountant will help relieve stress in the future and save your hard earned money.

Tax liability to the government is not impossible to understand.

Canada Revenue Agency – Federal level

GST number – if your business makes more than $30,000 gross sales per year, than you need to register for GST.

Business number – CRA will issue a business registration number once you register. If you are an incorporation, CRA will issue an incorporation number.

Payroll number – If you have employees CRA will issue your business a payroll number.

Import / Export number – if your business is involved in import and exporting of goods, CRA will issue a registration number for your business.

If your running an incorporation, keep in mind that the business becomes a separate entity from yourself and the company can run it’s own daily financial tasks.

If you are registered as a sole proprietorship, you and your business are one. If an issue arises the government can come after your personal assets.

A corporation can pay 14% corporate tax where the highest tax for sole proprietor is 39%. A huge savings.

It’s great to be able to have time to do your own bookkeeping. But if it’s not your forte, have a qualified bookkeeper look after it for you. You will be more informed as to where your finances are as well as you will be wearing one less hat.

Running a Business and Income tax liability can be a challenge. Consult an accountant or bookkeeper.

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