When Do You Need To Charge GST/HST On Chargebacks?

Many trucking companies have entered into arrangements with subcontracted carriers or owner-operators/contractors for charges such as fuel, insurance, or licensing fees. Anyone who has entered into such an arrangement should review their contracts from a GST/HST perspective. While the nature of such a payment may not make a material difference economically, the parties may be unknowingly exposing themselves to GST/HST liability.

Very generally, GST/HST must be charged on the consideration paid in respect of a taxable supply (e.g., sale) made in Canada. A true reimbursement for out-of-pocket expenses should not be regarded as consideration for a supply and, therefore, should not attract sales tax. Depending on the nature of the agreement, the amount of a chargeback payable under the agreement may be consideration for a supply or it may be a reimbursement. Sometimes the parties to an agreement use the word "reimbursement" without considering whether that is the