Chargebacks

Interlining may also involve transactions, other than freight transportation services, between the first carrier and the subsequent carrier (a chargeback). A chargeback for supplies used in the transportation of freight from one freight carrier to another freight carrier (such as a truck-owner operator), is not a supply of a freight transportation service. A chargeback is usually for goods and services (such as fuel, truck repairs, maintenance, or permit fees) used to provide freight transportation services but are not freight transportation services. A chargeback is usually subject to GST/HST.

Example
ABC is a GST/HST registrant in the business of transporting goods and subcontracts freight transportation services to DEF. ABC is considered the invoicing carrier and charges GST to the shipper. DEF is in the business of transporting goods and is contracted by ABC to move the goods. The owners/operators are the truck drivers who are subcontracted by DEF to physically move the goods.

In this example, ABC qualifies as the invoicing carrier and any charges for freight transportation services to them from DEF are zero-rated. Charges to the shipper of the goods by ABC are taxed GST/HST. Charges by DEF to ABC for fuel, truck repairs and maintenance, and permit fees are not considered zero-rated interline settlements, but rather chargebacks, and the above GST/HST rates apply.

Forms and publications

• Booklet RC4080, GST/HST Information for Freight Carriers
• GST/HST Memoranda Series Chapter 28-2, Freight Transportation Services