Application of PST to Disbursements

The question, when it comes to disbursements, is whether the disbursement forms part of the purchase price of legal services. If it is, then there is PST charged. If it isn’t, no PST is charged.

Of the 4 items listed under taxable disbursements, the only one that has PST charged to it by the lawyer is the mileage.

  • The courier and hotel charges are a recuperation of out-of-pocket expenses, so there is no PST attracted by it (although PST did apply to the hotel charge in the first instance, that is, when the lawyer paid the hotel for a room).
  • There is no PST charged on the photocopies.
  • The mileage isn’t a recuperation of out-of-pocket expenses, so it constitutes part of the purchase price of legal services, so PST is charged by the lawyer.
  • The lawyer would have paid $2.50 in GST on the courier charges (PST is not charged on courier fees). You do not show the courier charge as $52.50, including the GST. Rather, you show the courier charge as $50.00, net of GST allowing the lawyer to claim the $2.50 as a GST input tax credit. The lawyer collects the $2.50 from the client by showing the courier charge as disbursement subject to GST and charging 5% on that disbursement.

¹The hotel room is another example of how you would treat an out-of-pocket expense. In this example, the room charge was $129. In addition, the lawyer paid to the hotel: $6.45 in GST, $7.74 in PST, and $2.58 in hospitality tax, for a total of $145.77. You do not show the $6.45 in GST as part of the disbursement itself. Rather you show the hotel charges net of GST ($145.77 minus $6.45 equals $139.32), allowing you to claim the $6.45 input tax credit. The PST and municipal room tax are included in the $139.32 claimed for reimbursement, because the lawyer wishes to receive reimbursement from the client for these two sales taxes; unlike for GST, tax credits are not available for PST or hospitality taxes. You then collect $6.97 from your client in GST, by including the $141.90 (inclusive of PST and municipal tax) in the total disbursements subject to GST. This seems like an odd tax result, because in effect, the lawyer is charging GST on PST and hospitality tax embedded in the hotel charges. The lawyer paid only $6.45 in GST to the hotel, but the lawyer is charging the client $6.97 on essentially the same transaction. However, as of January 2014, CRA takes the position that these two sales taxes lose their personality as sales taxes when they form part of a lawyer’s charges for legal services, and hence GST is calculated as described here.


Have Questions or Need Advice?

If you have questions or need additional information respecting a specific situation, you can contact Saskatchewan eTax Services (SETS) by email at or by phone at 1-800-667-6102.