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Contractor paying Subcontractor

A contractor is hiring a subcontractor to do work (both are HST registered).

The contractor has an account with home depot, which he tells the subcontractor to use when picking up the supplies for the job.
(Note: the contractor is aware of the differences between an employee and subcontractor - RC4110 Employee or Self-employed? Has been reviewed)

The contractor tells the subcontractor he will get $10,000 + HST for the job less the supplies.
Supplies $2,000 + HST.
Net pay to the subcontractor is $9,040.00
$11,300 ($10,000 + HST) less $2,260.00 ($2,000.00 + HST)

Can anyone share their thoughts on this process and/or an alternative they see better fitting.

Thanks kindly

Sounds straight forward…debits and credits / receivable and payable


Doesn’t really matter how it’s dealt with for accounting purposes, the sub owes $700 of HST on this job.
I always tell those that subcontract in the construction industry to never, ever get into a scenario like this. It blurs the employee versus subcontractor lines just a little too much.

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Why doesn’t he just tell the sub he’s going to get paid 8k plus tax???

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Are you saying the subcontractor should purchase supplies and bill the contractor a fee for his services that includes supplies and labour to keep the line of separation?

Does it matter who pays for the supplies/materials? There is no mention of the word supplies/materials in RC4110.

good point

Think you made a mistake! $2000 X .13 = $260.

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