I have an agent managing a house for me. That means that they deal with various suppliers for maintenance and repairs. Suppliers issue invoices to my manager (not me) for work done. For example:I'm no tax expert and nobody should rely on my analysis, but based on my (limited) understanding of HST rules, it looks like the manager is making money by simply passing along the larger bill. It is the manager who can get back the extra HST that R.M. is paying.
$10,000 labour, material, etc.
$ 1,300 HST
$11,300 Total manager pays supplier
Then the manager invoices me as follows
$11,300 supplier services
$ 1,469 HST
I am paying $2,769 HST on the $10,000. This appears to be double payment of HST by me. The original supplier has collected the HST and will remit that amount. But the manager has done nothing more than pay the supplier bill, which included the HST and should pass on to me nothing more than the 11,300. (Management fees are charged separately to me.)
Is my reasoning correct? When the manager pays a bill for me which included HST, then is it incorrect to be billing me in the above manner? If I am wrong, then how do I solve the problem and pay only the $1,300 HST?
The manager begins by paying $11,300 and collecting $12,769, leaving $1469 in his pocket. But then he has to file his HST return. He will owe $1469 less the input credit of $1300 leaving a tax bill of $169. In the end the manager gets to keep $1300 (less any income taxes he would have to pay on this income). It’s possible that the manager simply doesn’t understand HST input credits and it’s the government that is pocketing the extra HST.
I’d like some thoughts from readers. Is my analysis correct? What is the best way for R.M. to correct this situation?