GST/HST on Rebilled Expenses, Disbursements, Ad Spend, Per Diems

Do I charge GST/HST on the whole invoice or only on my fee?

If you are registered for GST/HST, or required to be, generally on the whole invoice. GST/HST applies to the full price the client pays for your service (Excise Tax Act s. 165), and a cost you bought to do the job is part of that price. The exception is a true pass-through: an amount you paid a third party as the client's agent, for something the client receives. A small supplier that is not registered charges no GST/HST on any part of the invoice; see when to register for GST/HST.

The test is who the purchase is for (CRA Info Sheet GI-012). The CRA's sheet on out-of-pocket expenses agrees: a cost you did not buy as the client's agent is extra consideration for your service, taxed at the same rate (GI-197).

The rate on the whole price is the rate for the place where your service is supplied, for example 13% HST in Ontario (CRA); for other provinces, see charging GST/HST, PST and QST by province. If your service is itself zero-rated, so its tax rate is zero (s. 165(3)), no GST/HST is added to any part of the price; see charging GST/HST to US customers.

Cases stop being simple when you bill ad spend or agency work, have taxed some rebilled costs and not others, or a client has questioned the tax on a line. Tax you were required to collect on a cost that was part of your price (Excise Tax Act s. 221(1)) may be yours to pay if you left it off; see registered but did not charge GST/HST. Gather the client contract, the third-party invoices and who they name, who holds the account with the seller, and who is billed.

What counts as a disbursement for GST/HST?

An amount counts as a pass-through only if you paid a third party on the client's behalf for goods or services you did not buy for yourself. Everyday usage calls this a disbursement; the CRA calls it a reimbursement paid to an agent (GI-012).

To be the client's agent, three things must be true:

• Consent: you and the client both agree you act for the client. The CRA reads this from how you both act, not from a label or the lack of a contract.
• Authority: you can affect the client's legal position, such as binding the client to the purchase.
• Control: the client directs what you do.

The CRA also lists indicators that point toward agency:

The reverse points away. If you use the goods or services yourself, that generally indicates you did not buy them as agent. These are indicators, not a checklist, so the answer depends on all the facts.

The CRA's sheets name travel, hotels and per diem meals but not ad spend, so the ad spend answers apply the agent test and say "generally".

Is ad spend I pay for a client a pass-through?

Generally only when you buy the ads as the client's agent. If you buy them for yourself and bundle them into a managed service, they are part of your price. These rows are a reading of the CRA's indicators (GI-012), not a CRA list, and no one row decides it:

Only the amount you actually paid the seller can be a reimbursement. Billing more than you paid points away from agency, because the CRA asks whether you earn revenue by selling at more than cost, so the whole item may be part of your price, not only the markup (GI-012).

If the seller charged GST/HST on the ads and you are a true agent, the client's repayment includes that tax. You add no more tax and claim no credit; the CRA says the principal is the one entitled to any credit. For the tax a platform charges and the number to give it, see GST/HST on ads from ad platforms.

Do I add tax when I rebill travel, accommodation and other incidentals?

Generally yes. Flights, hotels, car rentals, parking, taxis and similar costs you incur so you can do the job are for your own use, so they are part of your price and carry tax at your service's rate. The CRA's out-of-pocket sheet lists them as typical costs not generally incurred as agent (GI-197).

When a cost gives you a full input tax credit, bill it without the GST/HST you paid on it. Tax you cannot recover, such as provincial sales tax, you may add to the amount first (GI-197). If you use the Quick Method, you generally cannot claim credits on operating costs, even rebilled ones (RC4058); see the GST/HST Quick Method.

A ticket or room you book for the client's own people, in their name and on their authority, may be a pass-through. Run the agent test on it.

Some travel costs give only a partial credit or none; see expenses with no or partial input tax credit.

Are meals and a flat-rate per diem taxable when I charge them to a client?

Generally yes. A meal cost or per diem you charge a client is part of your price, taxed at your service's rate. The CRA lists per diem amounts, such as meals, among typical out-of-pocket costs not generally incurred as agent (GI-197). A per diem is a set amount you charge, not an amount you paid a third party on the client's behalf, so it is not a reimbursement.

The CRA's memorandum on allowances covers allowances paid to employees, partners and volunteers; for anyone else, such as a self-employed contractor, an allowance may be consideration for a taxable supply (Memorandum 9-3). If you pay a per diem to your own employees or partners, you may be able to claim a credit on that allowance, and the meal limit below can apply (same memorandum; Excise Tax Act s. 236). A per diem you charge is not itself a purchase, so a contractor who keeps it has no credit on it. Otherwise, credits come from receipts for meals you bought.

Does listing a cost as a "reimbursement" on its own line change the tax?

No. A cost you bought for your own use stays part of the payment for your service even when the invoice shows it on a separate line labelled a reimbursement; the CRA's own example is an agent's hotel stay (GI-012). Who the purchase was for decides the tax, not the label.

The CRA's reimbursement memorandum covers employees, partners and volunteers, not client billing; payments between two companies are consideration for a supply, not reimbursements (Memorandum 9-4).

A separate line is still the right way to show a true pass-through. It just does not create one.

Can I claim input tax credits on costs I rebill, and what is the meal limit?

Generally yes on costs that are part of your price, if the usual conditions are met and you are not on the Quick Method, and no on true pass-throughs; the client is the one who may claim those. For a cost that is yours, claim the GST/HST you paid on time. For most registrants a credit must be in a return filed by the due date for the last reporting period that ends within four years after the end of the period the credit relates to (Excise Tax Act s. 225(4); Guide RC4022). Keep an invoice that supports it. See what a receipt must show.

For food, beverages and entertainment, you can generally claim only 50% of the GST/HST you paid, because the income tax deduction for them is also limited to half (Excise Tax Act s. 236; Memorandum 8-2).

The half limit does not apply to you when the client reimburses the amount, the amount is reasonable, and you identify it to the client in writing as a food, beverage or entertainment expense (Income Tax Act s. 67.1(2); GI-197). A client meal you rebill at a reasonable amount on its own invoice line may meet that test. A meal folded into your fee without being identified does not. Confirm your facts before relying on the exception.

The limit then moves to the client: a registered client that is billed an identified meal generally recaptures 50% of its credit on it (GI-197). For how a corporation tracks the half limit, see meals and entertainment in corporate books.

What proof shows I acted as the client's agent?

Keep records that show consent, authority and control, and that the amount was the client's, not yours:

• Written terms, in place before the purchase, saying you buy as the client's agent for named kinds of costs.
• The client's approvals of budgets or purchases.
• The seller's invoices and receipts, who they name as buyer, who holds the account with the seller, and who is billed and liable to pay.
• Bank records showing the client's money kept apart from yours, and books showing the amounts outside your own revenue and expenses.

Keep them for 6 years from the end of the year they relate to (Guide RC4022). They are easiest to gather before the invoice goes out.

How do I show a true pass-through on the invoice and in the books?

Show the fee and the pass-through as separate lines, and keep the pass-through out of your revenue and expenses.

1. Confirm the agent conditions before you buy.
2. On the invoice, bill your fee with GST/HST at the rate for your service.
3. Below it, add a line for the amount paid for the client, at exact cost, naming the seller and attaching its invoice. Add no tax of your own. If the seller charged tax, the amount you paid already includes it. The client, if registered, may claim the credit on it.
4. In the books, record the payment as money the client owes you, not as an expense. Record the client's repayment as clearing it, not as revenue.
5. On the GST/HST return, report only your fee as sales, and claim no credit on the pass-through.

The CRA treats keeping these amounts out of your own revenue and expenses, and the money apart from yours, as consistent with agency (GI-012). Costs that are yours go the other way: show them on a separate line or fold them into your fee, with GST/HST on the total either way, record them as expenses, and claim the credits your accounting method allows on what you paid.

When the facts are unclear, who can give me a ruling?

Generally a CRA GST/HST Rulings Centre. The CRA says that when it is unclear whether a person acts as agent, you can ask for a ruling or interpretation (GI-012). Businesses in Quebec generally ask Revenu Québec, which administers the GST/HST there (Memorandum 1-4).

A ruling is a written position on your stated facts, and the CRA considers itself bound by it, within limits. An interpretation covers a general situation, and the CRA says it is not bound by it (same memorandum).

The ad spend answers apply the agent test, and the CRA's view on your facts may differ. Write the facts down first: the contract, who holds the account, who is billed, and what the invoice shows.

Example

These examples are illustrative, in Canadian dollars, with 13% HST in Ontario. They assume the regular method of accounting, not the Quick Method.

Travel booked to do the job

An Ontario consultant buys C$3,000 of flights and a hotel (before the HST paid on them) to do a client job and bills them with a C$7,000 fee. The whole C$10,000 is the price of the service, so HST is C$1,300 and the client pays C$11,300. The consultant claims credits on the GST/HST paid on the travel, subject to the usual conditions.

Ad spend as the client's agent, or not

Assume the platform charges no GST/HST in either version. An agency pays C$10,000 to an ad platform as the client's agent under a written agreement, then bills a C$2,000 fee. If the agent conditions are met, only the fee carries HST: C$260. The client pays C$12,260, and the agency claims no credit on the C$10,000.

If the agency bought the ads for itself, HST applies to C$12,000: C$1,560. The difference is C$1,300.

A flat per diem

A contractor adds a flat C$75-a-day meal per diem for 20 days: C$1,500. It is part of the contractor's price, so HST is C$195. The contractor pays no one else a per diem, so there is no credit on it.

Different for you?

• You rebill ad spend, travel or meals and your invoices treat them differently, or a client has questioned the tax: which costs were true pass-throughs, what your invoice template should show, and whether returns already filed need correcting all depend on your contracts and invoices. The usual reassessment window is 4 years from the later of the due date and the filing date. See bookkeeping help.
• A platform charged you GST/HST on ads: see GST/HST on ads from ad platforms.
• Some of your costs give only part of a credit: see expenses with no or partial input tax credit.
• The client is in the US: see charging GST/HST to US customers.
• You paid business costs on a personal card: see business expenses paid personally.
• An invoice already went out with the wrong tax: see charged the wrong GST/HST rate.
• The client paid a deposit or has not paid yet: see GST/HST on deposits and unpaid invoices.
• You need to claim the credits or file the return: see filing GST/HST and input tax credits.