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Company pays trucking company to haul materials, who charge PST
Expert: Hank Bulmash
In my business, we have a third party truck company haul material to the well site that is drilling for oil and gas. The third party truck company charges us Saskatchewan PST of five per cent. We in turn flow through the trucking at the same cost to our customer. The question is, on say a $100 truck charge (pre-tax), we pay $5 to the truck company in PST, charge the customer the exact $5 on trucking, yet we have to remit this $5 to the government. Are we losing $5 as a result of having the trucking going through our books and being charged back to the drilling customer?
Hank Bulmash answered:
Here is what I believe is happening.
1. You pay a trucking company $105 for services. That $105 is made up of a $100 fee and $5 for PST.
2. You then bill your customer $105 to recover your disbursement for shipping. Your invoice reflects $100 for trucking charges plus $5 PST (if I understand your comments properly). You don't keep the $5 for PST, you remit it to Saskatchewan Revenue.
3. If that's correct then you are out of pocket. You're spending $105 but only receiving back $100.
4. I'm not sure why you charge your customer PST for repaying a customer disbursement. I don't think the payment you are receiving is subject to PST. To confirm this you should check with your local accountant or Saskatchewan Revenue.
If it's not subject to PST, then by charging your customer $105 as a reimbursement of your disbursement, you should break even.
About the author
Bulmash Accounting Professional Corporation/CPA
Linked In: https://www.linkedin.com/pub/hank-bulmash/0/389/811