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Books and Recordkeeping Requirements for the Harmonized Sales Tax

Rule 7.1-2 of the lawyers' Rules of Professional Conduct and subrule 8.01(2) of the Paralegal Rules of Conduct provide that lawyers and paralegals shall promptly meet financial obligations incurred in the course of practice. This includes financial obligations that have been undertaken on behalf of clients, as well as the professional's own financial obligations. To meet your responsibilities to collect and remit HST to the Canada Revenue Agency (CRA), you must keep track of the total HST receivable for services provided on your fee billings each month. This can be recorded in your fees book or you may keep a chronological file of all your fee billings.

The HST is recorded in your books and records as a debit to HST Receivable (from clients) and as a credit to HST Payable (to the government). HST payable to the government is offset by HST paid by you or your firm on the purchase of goods or services used in the firm.

Provided that you have adequate funds in trust for the client, once you have billed a client for fees, disbursements, and the applicable HST, you must transfer funds from your trust account to your general account for payment of your invoice as soon as it is practical to do so. It is not appropriate to transfer payment for your fees and disbursements only, leaving the HST to be held in the trust account, because HST collectible is not considered client trust money.

Note that once you have billed a client for services that are subject to the HST, regardless of whether the client has paid for those services, the HST must be remitted per the CRA's schedule. Your books and records should be accurate and current at all times as they may be subject to a HST audit. More information on the HST is available from the CRA website.

Additional Resources:

Canada Revenue Agency, Goods and services tax/harmonized sales tax (GST/HST)

TheBookkeeping Guide for Lawyers

The Bookkeeping Guide for Paralegals  

Harmonized Sales Tax (HST)

Disbursements and the Harmonized Sales Tax (HST)

LawPRO® Transaction Levies and the Harmonized Sales Tax (HST)

Showing the Harmonized Sales Tax (HST) on a Statement of Account

Withdrawing the Harmonized Sales Tax (HST) From Trust

Terms or Concepts Explained