A few weeks ago, a reader I’ll call Jeremy asked a question about how to handle HST for a practice run with a partner I’ll call Sandy . Sales tax specialist Andrew Davis (contact details below) was good enough to help me sort out HST rules for Jeremy. Here is Jeremy’s situation: Sandy runs a business in Ontario offering an HST-exempt service out of an office she rents. The service Jeremy offers is HST-taxable. Because Jeremy offers a different but complementary service to the public, Sandy suggested that Jeremy offer his service out of Sandy’s office space. To compensate Sandy for directing customers to Jeremy and providing office space, supplies, computers, etc., Sandy suggests that Jeremy pay her 40% of his revenues. The complication comes with how to handle the HST. Jeremy must charge his clients the HST, but how should it be split between Jeremy and Sandy. How to handle HST starts with exactly who is contracting with the customers. Here are some possibilities: Case 1 : J...

Reader R.M. is having trouble being double-charged HST for work done on a property. The following is a lightly-edited version of his situation. 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: $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 $12,769 Total 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 m...

With Ontario and BC making the jump to the Harmonized Sales Tax (HST), we’re bombarded with negative stories about paying more in sales taxes. However, the reality isn’t all bad. What is missed is that often the provincial sales tax (PST) used to be charged more than once on the same item. In these cases the HST is actually less than the combination of GST and PST. I’ll illustrate this with a simple contractor example and give you something to look out for on your next contractor bill. Let’s look at an example using Ontario percentages (5% GST, 8% PST, and 13% HST). Suppose that you hire a contractor to do some work that involves $1000 worth of parts or materials that were subject to GST and PST before and HST now. After July 1, here is the accounting: – contractor pays $1000 + HST = $1130 for the parts – contractor collects HST on the entire job from you – contractor gets back the $130 HST he paid on the parts in the form of an input credit This way, the HST is only char...