Do your clients reimburse you for expenses you incur to provide a service (such as air travel, car rentals, specific office supplies)? The Canada Revenue Agency recognizes these as “out of pocket expenses”. While the amount of the reimbursement is left to be determined by the customer and the seller, there are rules around any associated sales tax.
There are 2 factors that determine if the supplier (if they are a GST registrant and NOT acting as the client’s “agent”) should charge the sales tax on the pre-tax amount of the expense: Who receives the expense and the “place of supply rules”.
Generally, if a supplier passes on the cost of an out-of-pocket expense incurred to create a taxable supply (service) to a customer, they will pass on the pre-GST/HST cost (this may include unrecoverable taxes such as provincial sales tax) of that supply and collect sales tax on that amount (they will not include the original GST/HST paid). They can then usually claim the GST/HST paid as an input tax credit against the GST charged and collected. As usual, there are exceptions, so some preliminary reading is essential. Happy Accounting!
The CRA has a few detailed resources with easy to follow examples.
Cedar Creek CPA 