HST on legal fees and disbursements

Legal fees are almost always taxable

Fees for legal services supplied in Ontario are generally taxable supplies for HST purposes. The lawyer or paralegal collects HST at 13% on the fee and remits it to the CRA. A narrow set of legal services is exempt - GST/HST Memorandum 5-3 lists them.

The CRA agency principle in one paragraph

Under CRA Policy Statement P-209R, a disbursement a lawyer pays as agent for the client is treated as if the client paid it directly: it is not part of the lawyer's own supply, so it is not re-billed with HST. A disbursement the lawyer incurs for the firm's own account and then on-charges to the client is part of the lawyer's own supply, so it is re-billed with HST.

Common examples of agency disbursements

• Court and tribunal filing fees paid on behalf of the client.
• Land registration fees.
• Sheriff's fees.
• Witness fees.

These are typically paid to a public body, at a fixed statutory amount, on the client's behalf.

Common examples of non-agency disbursements

• Photocopying and printing on the firm's equipment.
• Long-distance phone and courier charges the firm incurred.
• Title searches ordered on a firm account.
• Third-party service reports the firm procures for its own use.

These are inputs the firm consumed to provide the legal service, so the on-charge is part of the taxable supply and HST applies.

Common mistakes

Charging HST twice - once on the receipt and again on the on-charge line - is a common invoicing error. So is misclassifying an agency item as taxable, or treating every court-related fee as agency without checking who the payee was. When in doubt, look at the receipt: if it is addressed to the firm, it usually is not an agency disbursement.