GST and PSTin my Expenses in Canada - ask an

i am self employed as a contractor for a company..   they pay me cash for helping them work and no tax is taken off.  i make like 40g a year b4 tax.  i do not sell anything to collect gst on!   i DO have write off's for my business.  i was wondering if when i am adding up my writeoffs for supplies etc, do i write of the total receipt including the tax?  or do i not include the tax?
david ingram replies:
I am assuming that you are collecting 7% GST with your contract fees.  Therefore if you bill $10,000, they pay you $10,700.
I am also assuming that you do not have a PST number and are not collecting PST.  PST is an unusual tax because it is applied unevenly.  For instance a car repair shop or an upholsterer and a lawyer have to charge PST on their service or labour charges.  I do not have to charge as an accountant.
Your expenses are $1,070 for accounting fees. ($1,000 plus $70.00 GST, NO PST)
$2,290 for gas expenses ($2,000 plus $140 GST and $150 PST (BC rate)
$3,425 for car lease. ($3,000 plus $210.00 GST and $225.00 PST)
Your GST return would show $700 collected and you would then subtract $420.00 GST input and you would owe anther $280.00 ($700-$420).
For your tax return, you would use form T2124 and show $10,000 as income and deduct the $6,450 ($6,000 plus $450 PST) of expenses in the proper place and pay tax on $3,550.  You do NOT deduct the GST.
For your information, the last six returns brought to my office by other people were done incorrectly.  However, I had to amend one of the returns I prepared last year and discovered that "I" had included the GST in half of the figures. It was really obvious when one of the figures was $321.00 for accounting and I should have spotted it.
Answers to this and other similar  questions can be obtained free on Air every Sunday morning.
Every Sunday at 9:00 AM on 600AM in Vancouver, Fred Snyder of Cartier Partners and I will be hosting an INFOMERCIAL but LIVE talk show called "ITS YOUR MONEY"
Those outside of the Lower Mainland will be able to listen on the internet at 
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Old shows are archived at the site.
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