Building a new house how is HST charge by contractor? Materials ordered already have HST does this mean you only pay HST on labour?If subtrades quote already includes HST on materials and labour does the contractor also charge HST?
You are billed by the general contractor for the project. This bill will have HST and will include materials and labour.
The general contractor is billed by the trades. This bill will have HST and will include materials. The general contractor writes this invoice off.
The trades are billed for material by point of sale. This bill will have HST. The trades will write these invoices off.
Writing off an invoice against income shifts the HST to the final user - you.
It may seem like its all being paid multiple times, but it is only being paid by you, the end user.
Contractor always add HST to hid materials and labour even though he paid the materials HST already at the time he purchases otherwise you should purchase your materials by yourself and contractor will charge you the HST only for his service however it's hard sometimes
If the contractor is charging HST on materials that have HST already charged then technically it is a mark up. Although I agree with other posts that HST to past to the end user. An example scenario would be:
Material=$100.00 with HST thats $113.00.
If the contractor is charging you their total cost with HST then adding HST ($113.00+HST=$127.69) then you are experiencing a material mark up of 13%.
From this scenario $127.69 the HST goes to the government $14.69 and the contractor uses the original purchase with HST as a tax credit ($13.00) meaning he pays the additional HST of ($1.69) due to their mark up profits. Essentially the contractor makes $13.00 or 13% off of all material purchases with this structure.
It is extremely common practice for most contractors; used to mitigate cash flow surprises, I call it stacked HST mark up. If they agreed to provide material at no mark up then it could be deceiving. They should have announced their mark up to you.
That said a 13% mark up is not much in this industry.
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