Free download · no email required
CSV: each Alberta-relevant Xero rate, its account-class validity and what to use it for.
Download the tax-rate list (CSV)An Alberta organisation in Xero needs surprisingly few tax rates, which is exactly why the ones it needs deserve to be understood precisely. This reference documents the pair Xero seeds for Alberta, the three custom 0% rates every real ledger adds, the other provinces’ pairs an Alberta business borrows, and the class rules deciding where each rate is valid.
Seeded: the AB pair
AB - GST on Sales and AB - GST on Purchases, both 5%, arrive with every Canadian Xero organisation. The naming carries the direction: sales rates belong on revenue, purchases rates on costs and assets, and Xero enforces the split through per-class validity flags. Between them they cover the overwhelming majority of an Alberta company’s taxable lines, with the purchase-side 5% generally returning in full as an input tax credit.
The other provinces’ pairs sit alongside, seeded and ready. They matter the moment place of supply leaves Alberta: ON - HST on Sales at 13% for the Toronto client, the BC pair when equipment is delivered to a Vancouver site. Coding out-of-province activity with Alberta’s 5% is the misstep the naming convention exists to prevent.
Added: the three zeros
Xero Canada ships no zero-rated, exempt, or out-of-scope rate, so an Alberta org adds three custom rates at 0% before serious bookkeeping starts:
- Zero Rated, for supplies taxed at 0% where ITCs survive: basic groceries, exports, international freight and fares.
- Exempt, for supplies outside the charge where related ITCs do not: financial services, insurance, residential rent.
- Out of Scope, for non-supplies: wages and source deductions, permits and government levies, transfers, drawings.
Add them under the Tax menu, Tax settings, Tax rates; a custom rate can apply to both sales and purchases. The three-way split is not pedantry. On the GST return it is the difference between credits you keep, credits you never had, and money the system does not see.
Validity: why a code gets refused
Every Xero rate carries per-class flags deciding the account classes it can sit on. The pattern is consistent: purchases rates work on assets, equity, expenses, and liabilities but not revenue; sales rates work on revenue and not expenses or equity; the custom 0% rates travel everywhere. The downloadable grid shows the Yes/No per class for each rate, which turns Xero’s invalid-tax-code error from a mystery into a lookup.
A month of lines, coded
Walk one ordinary month through the list and the system explains itself. The office chair from a Calgary supplier: AB - GST on Purchases, 5% back as a credit. The monthly bank service charge: Exempt, no tax and no credit, because financial services sit outside the charge. The wholesale order shipped to a US customer: Zero Rated, keeping the credits on everything that produced it. The invoice to the Toronto client: ON - HST on Sales at 13%, because the client’s province governs. Payroll: Out of Scope, not a supply at all. Five lines, five different answers, and not one of them ambiguous once the rate list is understood.
Practical notes
Tax rates cannot be imported by CSV; they are seeded plus hand-added, which is why the matching Alberta chart of accounts for Xero instructs creating the three custom rates before running its account import. Resist renaming the seeded pairs; every connector and every accountant knows the defaults, and Nova Scotia’s 2025 rate change is a standing reminder to review any custom copies of provincial rates when the CRA moves a number.
Rate selection ultimately happens line by line, at entry speed. Dext anchors recurring suppliers with rules. ExpenseFlow reads each document and applies the correct rate for the supply, including the out-of-province and no-tax cases, before posting to Xero. Hubdoc keeps captures organized against the entries. QuickBooks users have the same decisions under different names: see the Alberta QuickBooks sales tax codes.