HST and Reimbursable Expenses

by Carrie
(Ottawa, ON)

HST - charging reimbursable expenses to clients


How do I include on my invoice to my client the expenses for which they are going to reimburse me? How do the place of supply rules apply to these expenses?

For example:

I am located in Ontario, I do a service for a client in Quebec. I charge them $100 plus 5% GST. I do not charge them 13% HST because they are located in Quebec.

On the invoice, I would also like to include expenses that I incurred to do the service. I have supplies, totaling $11.30 that I purchased in Ontario that include 13% HST. How do I put these expenses on the invoice? Do I enter the total amount ($11.30), and do not indicate taxes at all? Do I only include the federal component of the HST (5%), putting $10.50? Or do I put the entire amount and indicate the 13% HST?

Thanks for you help.



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Hi Carrie,

It is my understanding that you charge back the GST/HST that you paid.

You purchased supplies in the province of Ontario, which is a participating province, on behalf of your client. To charge GST, the goods would have had to have been shipped directly to Quebec. However, you physically picked up the supplies for the client in Ontario, so HST is charged.

You must indicate
the sales tax type and amount on your invoice so that your client can claim their input tax credits. When you send the bill, you need to attach a copy of the sales receipt(s) as backup for their GST/HST return. Keep the original receipt(s) for your files as you need the original copy to claim your ITCs..

Make sure YOU claim any ITCs for expenses that will be reimbursed (just like you would for any expense you make) ... which is why you keep the original invoices.

To be comfortable with your decision on how to record this transaction, you could phone CRA. Make sure you ask for and make a file note of their name, ID and call centre. Ask for a reference too. In the event of an audit, CRA could forgo penalties and late charges if the advice you received from CRA was incorrect.





P.S. This post was revised January 2, 2012. An error in who keeps the original vs copy of the receipt was corrected.

P. P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.

Comments for HST and Reimbursable Expenses

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Nov 20, 2012
 What if the expense has no HST
by: Alan

Hi

If the reimbursable expense was $250 for a government fee, do I charge HST when requesting the reimbursement or does it retain its HST exempt status?

I found my answer and just wanted to share with your readers:

It depends if they were incurred as agent - see Cyndee Todgham Cherniak's blog on HST and Disbursements at thehstblog.com/tags/expenses/

If they were incurred by an Agent they retain their exempt nature.



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Thanks, Alan

Here is what Cyndee says:

"The expenses/disbursements incurred as agent may be passed on to the client without additional GST/HST (however, the service provider should not take an input tax credit and then not charge GST/HST as the GST/HST should be passed to the recipient)."

She quotes CRA position where she is using lawyers as the agent:

"The phrase “incurred as agent” indicates that the disbursement described is generally incurred in a lawyer's capacity as agent for a particular client. As such, no GST/HST is exigible on the subsequent reimbursement by the client. The phrase “not incurred as agent” indicates that the disbursement described is generally incurred otherwise than in a lawyer's capacity as agent for a particular client. As such, GST/HST is exigible on the subsequent reimbursement by the client (to the extent that GST/HST is exigible on the consideration for the service provided by the lawyer to the client). The characterization of each disbursement is based on the application of the principles of agency to a typical transaction involving that disbursement.Policy statement P-182R, Agency was used as the basis for this analysis."
Jan 10, 2013
 HST on reimbursable expenses
by: Tim

My travel/hotel car rental cost, including HST or other taxes applicable, when I visit a client in BC or when I travel to the US on behalf of a Canadian client are typically reimbursed to me at cost.

I used your approach but today was informed by CRA that all such expenses should be included as income and the applicable taxes (BC HST @ 12% and 2.8% for Mississippi !!! should be included in my 2013 HST return.

I thought it was a wash, I gain no benefit, merely a reimbursement of total (TIP) expenses at cost. It appears to be double dipping HST on HST in the BC case and goodness knows what the 2.8% for the deep south USA represents.

Any recent thoughts. Thanks



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Tim, to get reimbursed by your client, you had to invoice the client for the expenses. When you invoiced the client, the reimbursed expenses billing would go to an income account, not netted against your expense accounts.

When billing the client, I back out any GST/HST/PST and then apply the appropriate tax rate so the billing is the same as your expense.

I'm not up on U.S. sales tax ... but I treat any U.S. sales tax as an expense that is not claimable in Canada.

If billed properly, everything should be a wash. What you paid out should be what you billed to your client.

When you billed your client, did you not book your invoice to income? Or am I missing something?
May 04, 2016
 If expenses are reimbursed
by: Jo from Victoria, BC

In our consulting business, one of our contracts stipulates that the company will reimburse our business for any out of pocket expenses.

When I do the invoices I include the expenses. When I enter them into Simply Accounting do I still enter them as expenses? If so how do I enter it when they are reimbursed. What do I do about the GST? Really the other company is paying the GST so I don't think I need to enter it.

I look forward to your input.
May 04, 2016
 Jo
by: Lake

I moved your post here as it discusses how to invoice your reimbursable expenses. Post back if you have more questions after reading it.
Oct 09, 2016
 Contractor tax question
by: Dre in Canada

My personal training company charges clients $50 per session (taxes already included in the price), and pays the personal trainers the full $50 per session.

Does the company have to pay the taxes for that $50 at the end of the year? Or does the trainer have to pay the taxes?
Oct 09, 2016
 Dre
by: Lake

This my understanding:

1. You are GST/HST registered by the information in your post therefore your sales are taxable.

2. Your clients are customers who you invoice, with the invoice clearly showing the GST/HST paid on any invoice over $30.

3. Your personal trainers are contractors who must bill YOU to be paid as they are not employees who are paid a wage.

4. Your contractors may or may not be registered to collect sales tax. The only way you will know is if their bill to you includes sales tax or not.

5. You must remit the sales tax you collected from your clients on line 105 of YOUR GST/HST return. You can offset the amount due by the amount of your input tax credits of line 108 of YOUR GST/HSY return. This means you pay the net calculated on line 109 of YOUR GST/HST return.

6. If any of the contractors charge you sales tax, you may deduct this as an input tax credit on your sales tax return along with all your other allowable input tax credits.

Hope this helps.
Aug 09, 2017
 Offsetting of HST as income and expense
by: Anonymous

Hi,

My client does not show the HST on Expenses charged to clients when billing them.

For example, if the reimbursed expense is an airfare that costs 1000 (inclusive of HST), the amount shown on the invoice is Travel expenses - $1,000. No HST breakdown - I record the bill as "Expenses charged to client - Income" for the whole amount of $1,000.

When my client paid for the airfare, I recorded the airfare as "Expenses charged to client - Expense" - for the whole amount as $1,000 too - no input tax.

In effect, the billed airfare and expense just offset each other. To simplify my accounting, I just don't record the HST on invoice and the input tax in my expense. Is this valid? Thank you.
Oct 26, 2017
 Offsetting of HST as income and expense
by: Lake

As much as you would like to simplify your bookkeeping, CRA may not be in agreement with your simplification.

You should check in with your accountant and/or call CRA and get a ruling.

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