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Since zero-rated, exempt and out of scope taxes have zero sales tax implication on a transaction, they all seem to be the same to a lay person. However, these tax codes differ and can have implications for input tax credits.
Typically, any transaction that is not going to impact your tax returns or tax liability will be assigned the ‘Out of Scope’ tax code. Think of instances such as when funds are being moved from one bank account to another, or if a bank account is used to pay a credit card bill, or if funds are being moved between your business and you. In these instances, the movements are taking place between balance sheet accounts (i.e., bank accounts, credit card accounts, owner contribution/draws). These transactions have no impact whatsoever on your income statement and therefore no impact on your income. In other words, transactions that are out of the ambit or scope of the sales tax system will be assigned the ‘Out of Scope’ tax code.
Between exempt and zero-rated supplies, keep in mind that exempt supplies are not taxable while zero-rated supplies are taxable at 0% rate. Understanding this difference helps while claiming input tax credits. If you are supplying anything that is exempt, then you cannot recover input taxes (i.e., sales tax paid to suppliers of goods and services used in the making of the such supplies). However, if you are supplying anything that is zero-rated, then you can claim credit for input taxes. The Canada Revenue Agency has given examples of exempt and zero-rated supplies here.