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Contract Discount is HST Charged on Pre or Post Discount Amount

  • Last Updated:
  • Apr 28th, 2020 7:53 pm
[OP]
Sr. Member
May 12, 2014
862 posts
483 upvotes
Markham, ON

Contract Discount is HST Charged on Pre or Post Discount Amount

I can't find anything online and hope I someone can help.

I'm in Ontario.
If I was quoted $15k for basement waterproofing, then the contractor offered to lower the cost to $12k, do I pay HST on $15 or $12?
The contract has not been signed.

Thanks
8 replies
Deal Addict
Nov 17, 2012
2621 posts
1614 upvotes
Toronto
$12K.

$15K shouldn't appear anywhere in the contract frankly.

What would make you think you would pay HST on the $15K? It's not in the contractor's interest, unless he's pocketing the HST on the $3K delta.

Charging you $12K but booking revenue of $15K and remitting HST on $15K doesn't help him at all, near as I can tell.
[OP]
Sr. Member
May 12, 2014
862 posts
483 upvotes
Markham, ON
torontotim wrote: What would make you think you would pay HST on the $15K? It's not in the contractor's interest, unless he's pocketing the HST on the $3K delta.

Charging you $12K but booking revenue of $15K and remitting HST on $15K doesn't help him at all, near as I can tell.
The updated quote I received shows taxes on the pre-discount amount. I asked if the tax can be applied on the post discount amount and he said that he has to pay the tax to the gov't on the full price.

It seems strange to me but I don't know anything about how discounts on contracts work in regards to taxes. I've been looking online and the CRA site and I can't find anything specific to this situation.

I read that if it's an early payment discount, you pay tax on the full amount, mfg rebates you pay tax on the full amount. In my situation, nothing's been signed so i don't understand why the contract can't just be amended to the lower amount and treat that as the gross.
Last edited by Bobberts on Apr 28th, 2020 5:44 pm, edited 1 time in total.
Deal Addict
Nov 17, 2012
2621 posts
1614 upvotes
Toronto
He's bullshitting you. He's looking to pocket HST on $3,000. There's no way he's reporting $15K of business income, remitting HST on $15K and only then charging you $12K + HST on $15K.

I'm happy to be proven wrong, but I've never heard of this sort of practice, and I've owned 3 homes and paid loads of contractors both with paper invoices and contracts and cash under the table. I've negotiated pricing down substantially on $25K jobs and this was never a topic of discussion.

I'd find a new waterproofing company. If they're shady, they will shortcut the work and materials. You can't see it once it's buried and they won't guarantee the work in any meaningful way.
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Jul 2, 2001
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GTA
Bobberts wrote: The updated quote I received shows taxes on the pre-discount amount. I asked if the tax can be applied on the post discount amount and he said that he has to pay the tax to the gov't on the full price.
Lol funny guy, tell him you called the cra and they said he shouldn't be doing that and they asked for his name which you didn't give just yet. Lets see what his answer will be.
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Feb 25, 2004
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Longueuil
Taxes are based on the amount that you pay, the "MSRP" is irrelevent.
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Oct 15, 2007
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It depends on how the discount is being presented. Is it described as a discount or did he lower the job cost altogether.
If it’s a straight up I’ll do the job for 12k and forget the 15k , Or is he counting the job as a 15k sale and the 3000k discount is counted as a payment. Either way I don’t see how he’d benefit other that claiming the extra revenue. Is he the owner of the company? If not I can see why it is done this way if he has sales goals to achieve. (I’ve worked for companies that count sales this way)
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[OP]
Sr. Member
May 12, 2014
862 posts
483 upvotes
Markham, ON
Red_Army wrote: It depends on how the discount is being presented. Is it described as a discount or did he lower the job cost altogether.
If it’s a straight up I’ll do the job for 12k and forget the 15k , Or is he counting the job as a 15k sale and the 3000k discount is counted as a payment. Either way I don’t see how he’d benefit other that claiming the extra revenue. Is he the owner of the company? If not I can see why it is done this way if he has sales goals to achieve. (I’ve worked for companies that count sales this way)
The contract is laid out as $15k + tax, then discount as part of the payment. The person I'm dealing with is one of their consultants.

This part makes perfect sense.
Red_Army wrote: Is he the owner of the company? If not I can see why it is done this way if he has sales goals to achieve. (I’ve worked for companies that count sales this way)
The other quote I received, they lowered the contract so the HST is on the lower amount. I going with this company.

Thanks all for your input.
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Feb 25, 2004
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Longueuil
Bobberts wrote: I asked if the tax can be applied on the post discount amount and he said that he has to pay the tax to the gov't on the full price.
I don't understand why he would do that (I don't see how it could be considered as extra revenue, that would look like fraud to me trying to boost your revenue and increase the value of your company on the stock market for example) but the bottom line is no. He doesn't HAVE to, he WANTS you to... Right there that is a lie and it smells fishy. Is there some law in Ontario if a contract is >= 15k the customer lose some potential rights? It might be something like that.
Try not! Do or do not, there is no try...

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