Entrepreneurship & Small Business

Charging HST when you can't charge HST

  • Last Updated:
  • Nov 14th, 2018 10:46 am
[OP]
Member
Feb 2, 2017
218 posts
91 upvotes

Charging HST when you can't charge HST

Hi everyone,

I don't know who to ask this except for my fellow wonderful RFDers.

I am a freelancer and I currently work for two US companies on contract on a regular basis. I don't charge HST for the work I do obviously because they are in the US.

I've been offered a freelance position with a Canadian company doing the same sort of thing. This isn't a system where I can send invoices, they just pay me for the work I do. Given that they are in Canada, it seems like I should be charging HST, but I can't, because that's not how their system works - it's blanket pay for everyone and it's automated. Does that mean that I will be earning 13% less if I accept them as a client, because I've got to pay HST off of what I earn?

Thanks!
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9 replies
Deal Addict
Feb 5, 2009
2610 posts
738 upvotes
Newmarket
If you are a freelancer and your services are taxable you should be registered for hst, you must register for hst if your total revenues in 4 consecutive quarters exceed 30K. You do not charge hst your US clients, but should be claiming ITC on your purchases.

"their system" should work exactly as Canadian laws require.

I can't tell Canadian Tire that they will not charge me hst because that's not how my system works, the applies same to your clients.
[OP]
Member
Feb 2, 2017
218 posts
91 upvotes
I am registered for HST and submit a return each year and claim ITCs. The contract they have sent me states that I am responsible for all taxes including sales taxes.
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Member
Jul 13, 2016
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atorring wrote:
Oct 31st, 2018 5:19 pm
I am registered for HST and submit a return each year and claim ITCs. The contract they have sent me states that I am responsible for all taxes including sales taxes.
That's very stupid on their part because they are a business too and they should be able to get the HST you charge them refunded (except if they are a bank, an insurance company or something like that).

I would say that their refusal to do business the correct way show that there's something shady going on. If I were you I would approach them with caution. Lots of scams going on in the freelance world.

By the way I think you only need to charge them GST (5%) if they do not have an office in your province. Don't take my word for it though.
Member
Nov 12, 2014
446 posts
248 upvotes
Kingston, ON
emilio911 wrote:
Oct 31st, 2018 9:50 pm
That's very stupid on their part because they are a business too and they should be able to get the HST you charge them refunded (except if they are a bank, an insurance company or something like that).

I would say that their refusal to do business the correct way show that there's something shady going on. If I were you I would approach them with caution. Lots of scams going on in the freelance world.

By the way I think you only need to charge them GST (5%) if they do not have an office in your province. Don't take my word for it though.
Yeah, that's not correct - need to follow the place of supply rules.
Deal Addict
Feb 5, 2009
2610 posts
738 upvotes
Newmarket
atorring wrote:
Oct 31st, 2018 5:19 pm
The contract they have sent me states that I am responsible for all taxes including sales taxes.
Yes, that's what companies do, that means you are not an employee, they do not deduct nor remit taxes on your behalf, you do everything yourself. Very common.
It doesn't mean you can't charge them hst.
[OP]
Member
Feb 2, 2017
218 posts
91 upvotes
Homerhomer wrote:
Nov 1st, 2018 9:16 am
Yes, that's what companies do, that means you are not an employee, they do not deduct nor remit taxes on your behalf, you do everything yourself. Very common.
It doesn't mean you can't charge them hst.
Thank you. I am asking them for clarification.
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Deal Fanatic
User avatar
Mar 23, 2008
7321 posts
4229 upvotes
Edmonton
No matter what your agreement with the company, you have to pay GST/HST based on CRA rules. So you need to do your due diligence on what you're required to remit, and what your agreement with that company allows you to charge. Obviously it would be better for you if you don't have to eat the sales tax costs.

C
Deal Addict
Jul 3, 2017
3027 posts
2052 upvotes
Also keep in mind that if you are required to pay HST, you must remit the HST quarterly on the amount you have invoiced, even if you have not yet been paid.

Keep track of your business expenses that include HST or GST, because you will be able to deduct the tax paid from the amount you remit.
Newbie
Feb 7, 2018
22 posts
3 upvotes
Sounds like they are treating you as a contractor but also employee at the same time (but not taking off source deductions). They will get in hot water over this... but that doesn't solve your immediate issue.

Everyone is right, you do have to pay HST/GST if you are acting as a contractor. You need a business number and GST number (easily attained). In order to charge GST, you need to send them an invoice clearly showing the GST number, amount, and terms of the invoice. If they do not accept the invoice (you should ask if you want to do business with a company like this...), then it is up to you to eat the GST/HST for each period.

If you accept, I suggest keeping track of your taxable expenses to offset the GST taken in. You can use the expenses for both jobs which helps.

Justyn
Bookkeeping Specialist

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