Why are my customer-reimbursed expenses showing as income in the Sales Tax but not the Sales report?

These are customer expenses we pay and then have reimbursed by the customer (no markup). Entered as billable expenses and invoiced to the client. They pay and the expenses are zeroed out. Also and probably a bigger question - should these reimbursable expenses be showing as income or not? Thanks

Answer

hi. Yes reimbursed expenses must be shown as income. Both the CPA handbook and the Excise Tax Act agree on that point. If you’ve been netting then you’ve been understating your taxable supplies. 

I hope you charged Gst / Hst on those amounts when you are reimbursed. 

And if you are in a province with PST the PST is an end cost and yes you should be charging Gst on the PST as it loses its identity as a tax and becomes another cost.  

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Eileen Reppenhagen , TaxDetective
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