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PST and the Contractor

Expert: Mr. Manipula

Janice asked:

I am going into the carpentry business. Do I pay PST on the materials I purchase for these jobs? Do I charge the customer PST?

Mr. Manipula answered:

Customers buying real property, land, buildings or constructed fixtures, are exempt from PST. However, as a contractor, you must pay PST on the lumber, hardware, and other materials you will need to finish a contract. PST is collected once, and in this case, it is the contractor who pays the PST, not the customer

In order for your business to recover the money spent on PST for materials, the total price of the job has to include the total amount of PST you have paid built-in to it. PST cannot be listed on the invoice separate item. Doing so would be collecting PST and in this case against the Retail Sales Tax Act.

For example--and ignoring GST for simplicity--if you bought $100 in lumber for a job, you pay an additional percentage of PST (8% in Ontario) for a total of $108. When you are writing up the estimate or invoice for the job, the cost of lumber must be listed as $108 dollars, not $100 plus $8 in PST.

About the author

Mr. Manipula is a Service Representative at the North York Office of the Ministry of Finance.

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