GST/HST when invoicing a client for kilometers
Reimbursed travel allowances
I invoice my client for kilometers. They have advised me to not charge HST on the kilometer part of my invoice. Should I be charging HST?
That's certainly news to me. Can you ask them give you a source reference that states per kilometre travel allowances are GST/HST exempt.
I do know that the CRA employee benefits chart (cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/bnchrt-eng.html) shows auto allowances do not include GST. You however are not an employee. Employee auto allowance rules are completely different than billable income / contractor reimbursable expenses.
As far as I know, if you are a GST/HST registrant, you charge the sales tax unless it exempt or zero rated.
When stuff like this happens, I like to call CRA and ask them for a ruling. If you don't want to do that and ...
... You can't come to an agreement with your client but don't want to argue, I would bill them the agreed upon rate excluding sales tax then charge sales tax. The net effect to them is the same ... better actually as they now have an ITC ... and you have charged sales tax on your income.
To calculate the sales tax on a 55 cent rate (Treasury Board kilometric rate in Ontario) is as follows:
55 / 1.13 = 48.67 (invoiced amount) x 13% HST = 6.32 (HST collected)
The next time your renegotiate your contract, I would lay out your reimbursement rate more clearly.