Chrome AccountingThis is a question about federal GST and Ontario HST, written for owners who source, arrange, or resell goods — and for the bookkeepers and advisors who prepare their GST/HST returns.
Is GST/HST calculated on your fee, or on the customer's full payment?
A business can call itself a "broker" and still be treated as a reseller for GST/HST. The Canada Revenue Agency (CRA) looks at the contracts, the invoices, and who bears the risk of the sale — not the job title.
Getting this wrong changes three things at once: whether you must register, what amount goes on the GST/HST return, and whose business number belongs on the invoice. Here is the difference in plain language, and the questions that usually settle it.
- GST/HST follows the supply you make, not the word "broker."
- A true agent or broker is generally taxed only on the commission or fee.
- A reseller or principal is generally taxed on the full amount charged to the customer, unless that supply is exempt or zero-rated.
- The $30,000 small-supplier threshold is based on taxable supplies before expenses. Paying a manufacturer does not reduce the threshold.
- Money held for a manufacturer is not automatically "not a sale." The documentation has to show it is the manufacturer's supply.
Why the distinction matters
GST/HST is charged by the person who makes the supply. Two common patterns look almost identical in a bank account and are treated very differently.
Agent / broker
You arrange a sale for someone else — the principal, often a manufacturer. You do not buy the goods in order to resell them. Your supply is the service of arranging or billing. GST/HST, if it applies, is generally on your fee.
Reseller / principal
You sell the goods (or services) in your own name. You may buy from a manufacturer and invoice the customer a higher amount. Your supply is the product. GST/HST, if it applies, is generally on the price you charge the customer.
CRA guidance on agents is in GST/HST Info Sheet GI-012, Agents, and in the registrant guide RC4022. Special collection rules can apply when a registrant agent sells goods for a principal who would not themselves have had to charge tax. An agent and a registrant principal can also file Form GST506 so that the agent accounts for tax on the principal's taxable sales. Those are exceptions. They do not turn every middleman into an agent.
Is GST/HST based on gross sales?
Short answer: only if you are the supplier of those sales.
| Situation | Usual GST/HST base |
|---|---|
| You invoice a commission or success fee only | That fee |
| You invoice the customer for the goods in your name | The amount you charge for the goods |
| You collect the customer's payment and keep a spread over the factory cost | Generally the full customer amount — you look like the seller |
| You collect a hold and record it as payable to the manufacturer, and the manufacturer (or an invoice in the manufacturer's name) is the seller | Generally not your taxable sale; your fee is still tested separately |
"Most of the money is just a hold for the plant" does not decide the issue by itself. What decides it is whether the customer is buying from you or from the manufacturer.
Does the $30,000 threshold use net commission?
No.
In general terms, you are a small supplier if your worldwide taxable supplies — including zero-rated supplies — plus those of your associates are $30,000 or less in a single calendar quarter and over the last four calendar quarters. Public service bodies have a different threshold. Certain amounts are left out of the calculation, including consideration for exempt financial services and most sales of capital property.
The figure is consideration for taxable supplies, before expenses. It is not profit. Deducting what you pay a manufacturer does not reduce the $30,000 test.
What can stay out of the test is money that is not consideration for a supply you make — for example, funds you receive solely as agent for a principal and record as payable to that principal. If those same funds are recorded as your sales, they will be treated as your supplies.
Exempt supplies do not count toward the $30,000 taxable-supply test. Zero-rated supplies do count, even though the rate is 0%.
Once you register, you generally charge GST/HST on taxable supplies from that point forward. Staying under $30,000 is not a reason to leave tax off invoices issued after registration.
Exempt product, taxable fee
The tax status of the goods and the tax status of the brokerage service are separate questions.
A common Ontario example: a resale residential property is generally exempt, but a real estate commission charged on that sale is generally taxable. The same idea applies in other industries. The customer's product can be exempt while your arranging, marketing, or consulting fee is taxable.
If your only supplies are exempt, you generally do not charge GST/HST and you generally cannot claim input tax credits (ITCs) on costs incurred to make those exempt supplies. If your supplies are zero-rated, you charge tax at 0% and you may still be able to claim ITCs.
Do not assume "the client does not charge HST, so we do not." That may describe the product. It may not describe your fee.
Holds and deposits
For GST/HST purposes, a deposit is generally an amount given as security for a future obligation. Tax on a deposit is generally not payable until the vendor applies it as payment toward the supply, or the purchaser forfeits it.
A "hold until the manufacturer is ready" may be a deposit. It may also be a prepayment of your own invoice. The agreement and the invoice wording control which one it is.
If you issue a document that looks like a sale of goods for the full hold amount, you increase the risk that the CRA will treat you as the supplier of those goods.
What should the invoice say?
Tell the customer whether GST/HST is extra or included, and at what rate. You may show tax separately or show a total that includes tax. For HST, show the single HST rate — do not split HST into federal and provincial parts on the invoice.
Put your GST/HST business number on your supply. Put the manufacturer's number on the invoice for their supply, if they are the supplier and they are registered.
A clean paper trail is usually two documents:
- Product document — the seller is the manufacturer, or the document is clearly issued as agent for the manufacturer.
- Commission invoice — your legal name, your GST/HST number, a description of your service, the fee, and tax on that fee if it is taxable.
Do not put the manufacturer's tax ID in the supplier-number field on an invoice that is actually yours. A customer who claims an ITC needs the number of the person who made the supply.
Registrants who claim ITCs also need supporting information that increases with the size of the purchase: supplier name, date, amount, GST/HST number, and for larger invoices the recipient's name and a description of the supply. Incomplete invoices are a common reason ITCs are denied.
Questions that show broker versus reseller
Ask these of the owner, then read the contracts against the answers.
- Whose name is on the customer contract as seller of the product?
- Whose name is on the customer invoice for the goods?
- Who sets the price to the end customer?
- Can this business bind the manufacturer, or only introduce a buyer?
- If the customer does not pay, who bears the loss?
- If the goods are late or defective, who does the customer look to?
- Does the business ever take title, or appear as owner on shipping or insurance documents?
- Is inventory held, or does the plant ship directly to the customer?
- When cash arrives, is it booked as revenue or as due to the manufacturer?
- Is the amount kept a stated commission, or whatever remains after the factory is paid?
- Is there a written agency or brokerage agreement?
- Are holds refundable security for the manufacturer, or payment of this company's invoice?
Reading the answers
- Contract and goods invoice in the manufacturer's name, a set fee, manufacturer bears the credit risk, holds recorded as payable to the plant → usually agent. The GST/HST analysis starts with the fee.
- Goods invoiced in this company's name, a markup on factory cost, this company bears non-payment, deposits recorded as sales → usually principal. The GST/HST analysis starts with the gross customer charge.
- No written agency and a single invoice for "product + hold + fee" → treat as reseller until the documents say otherwise.
One bookkeeping question often ends the debate: if the customer pays $50,000 and the plant is owed $42,000, is that $50,000 of sales, or $42,000 held for the manufacturer plus an $8,000 fee?
Ontario checklist for firms and bookkeepers
- Identify each supply — goods, arranging service, marketing, consulting.
- Classify each supply as taxable, zero-rated, or exempt.
- Measure the $30,000 test on taxable supplies only: include zero-rated, exclude exempt.
- After registration, charge tax on taxable Ontario-place-of-supply fees at the HST rate that applies — 13% in Ontario.
- Keep agency agreements, shipping terms, and invoice templates aligned with the books.
- Record manufacturer holds as a liability if they are not your revenue.
- Claim ITCs only where the inputs relate to commercial (taxable or zero-rated) activity and the invoice support is complete.
- Confirm GST/HST numbers on the CRA registry before relying on a supplier invoice for ITCs.
FAQ
We pay the manufacturer almost everything we collect. Are we under $30,000?
Not if the customer paid you for a supply you made. The threshold does not net out factory cost.
The product is HST-exempt. Can we skip HST on everything?
Only on supplies that are themselves exempt. A separate fee for consulting, lead generation, or marketing to a Canadian client is often taxable even when the underlying product is not.
Should every invoice say "HST included"?
No. Say that only when tax is actually included in the total. Exempt product invoices should not say HST is included. Hold receipts should not look like taxable sales invoices unless they are.
Should our invoice equal what we pay the plant?
No. Invoice the supply you make. The plant invoices the product if the plant is the seller.
Should we print the manufacturer's tax ID on our invoice?
Not as the supplier number on your own invoice. The number on an invoice should belong to the person making that supply.
Not sure whether you are the broker or the seller?
Ali Alsharif, CPA, MPAcc — Chrome Accounting. Have your contracts, invoice templates, and GST/HST filings reviewed together, before the next return goes in.
T: +1 289 969 3491 · Connect on LinkedIn
Book a ConsultationThis article is general information for educational purposes. It is not legal, accounting, or tax advice, and it is not a CRA ruling. GST/HST results depend on the written contracts, who makes each supply, place of supply, registration status, and the facts of the industry. Agency is a legal relationship; calling a business a broker does not create one. Rules, rates, and administrative positions change — do not register, invoice, or file from this page alone. A CPA Ontario firm can review your contracts, invoice templates, and GST/HST filings and apply the Excise Tax Act to your situation. For legislation and forms, see the CRA publications cited above, including GI-012, RC4022, and Form GST506.