You Remitted Tax You Never Collected

A customer does not pay. The receivable ages, collection is attempted, and eventually the amount is written off. The income tax deduction gets claimed because the accountant sees the write-off in the accounts. The sales tax that was remitted on the same invoice, years earlier, is usually never mentioned again.

A Note On Currency

Everything here is stated as verified in August 2026 and requires confirmation before reliance.

We have not read the decision in Heydary and take its facts and reasoning from two commentary sources carrying near-identical wording, which we treat as one line of commentary[1][2]. Those sources describe three pitfalls and we obtained only two; we say so where it matters.

We have not read section 231 directly and take its content from commentary and CRA interpretations.

Our sources differ on how the four year limitation is stated, and we report the difference rather than resolving it.

One CRA interpretation we rely on refers to GST at 7 percent[5], dating it plainly; we use it for reasoning rather than for rates.

This is not tax advice.

Tax On Money You Never Received

The structural unfairness the provision exists to correct.

Commentary states the position plainly: in a sale of goods or services, the supplier must remit GST/HST whether the supplier is able to collect the money up front or not. That produces transactions where the supplier first bills a customer, then fails to collect either the principal amount or the tax from the customer, but has to remit GST/HST based on gross billings[3].

Another source explains the design reason: if you invoice a customer for a taxable sale, you must report and remit the tax on that invoice by the due date, even if no cash is received. This prevents businesses from using unpaid invoices as a way to defer tax[6].

Two observations, ours.

The remittance rule is deliberate and defensible. A system that waited for payment would invite manipulation of invoicing and collection timing.

But it means a supplier with a bad debt has funded the government out of its own capital, on a sale that produced no money at all.

Commentary describes section 231 as offering a vital form of relief: the ability to recover GST/HST previously remitted on debts that have become uncollectible[1]. It is relief for a real problem, and the rest of this article is about how narrow the door is.

One Invoice, Two Recoveries

The framing most businesses miss. This section is our own analysis.

An unpaid taxable invoice created two obligations at the time it was issued.

The revenue went into income, on the accrual basis, and tax was paid on profit that included it.

The sales tax was remitted on the same invoice, on billing.

So when the debt goes bad there are two separate amounts to recover, on two separate returns, under two separate provisions with different conditions.

The income tax route is the one businesses know. This publication has referred elsewhere to the deduction available under the bad debt provisions when a receivable proves uncollectible, in the context of a professional practice correcting an overstated work in progress figure.

The sales tax route is section 231, and in our experience of the material it is the one that goes unclaimed.

Two reasons, ours.

The write-off happens in the accounting records, which is where the income tax preparer looks. The sales tax return is prepared from a different process.

And the amount does not appear anywhere as a receivable. The tax was remitted years earlier and is not sitting on the balance sheet waiting to be recovered.

What The Two Are Worth

The magnitude, computed by us on illustrative figures.

Take an invoice of $45,000 plus tax at an assumed 13 percent, being $50,850 billed, of which nothing is collected.

Tax already remitted: $5,850.

Income already reported: $45,000.

The income tax recovery, as a deduction of $45,000 at an assumed 26.5 percent rate, is worth roughly $11,925.

The sales tax recovery under section 231 is $5,850, as a deduction from net tax.

Combined, roughly $17,775 on a single unpaid invoice.

Two observations, ours.

The sales tax piece is roughly a third of the total recovery and is the one most likely to be missed.

And unlike the income tax deduction, whose value depends on the rate and on there being profit to shelter, the sales tax recovery is a dollar for a dollar. It reduces net tax directly.

We flag that rates are assumed and that the income tax deduction requires its own conditions to be met, which this article does not work through.

It Is Not An Input Tax Credit

A mechanical point that decides whether a correct amount is correctly filed.

Commentary states that subsection 231(1) operates by a deduction from net tax as computed under subsection 225(1) rather than as an input tax credit[3].

Another confirms: unlike input tax credits, which are used to recover GST/HST paid on business inputs, bad debt refunds operate as a deduction from net tax under subsection 225(1)[4].

Two observations, ours.

The distinction is conceptually right. An input tax credit recovers tax the business paid on a purchase. This recovers tax the business remitted on a sale that failed. They are different events.

And it matters practically because input tax credits carry their own documentary requirements, which this publication has addressed separately. A bad debt adjustment is not subject to those, because it is not one.

The consequence is that a business claiming this amount by adding it to its input tax credit total has filed the right number in the wrong place, which is the subject of the next section.

The Line Nobody Uses

Where the amount actually goes.

Commentary states that the adjustment for bad debt is calculated on line 107 of the GST return, rather than being included in the total amount for computing input tax credits[3], and another confirms that suppliers report this adjustment on line 107[4].

Three consequences, ours.

A business that has never had a bad debt has never used that line, and its bookkeeping process contains no step that would populate it.

Software will not prompt it. The line is filled from a decision, not from the ledger.

And a claim made in the wrong box is visible. An input tax credit total that exceeds what the purchase records support invites exactly the enquiry described later in this article, over an amount the business was entitled to claim.

We would put that as the smallest and most avoidable failure in this area. The entitlement is real, the amount is right, and it has been reported as something it is not.

The Conditions

The requirements, as one commentary source enumerates them.

It lists: a taxable supply that is not zero-rated or exempt; the supplier being a GST/HST registrant with a valid business number; the supply having been made to a recipient as defined in subsection 123(1) who is contractually liable for payment; the supplier and recipient dealing at arm's length; the bad debt being formally written off in the supplier's books in accordance with generally accepted accounting principles; the supplier demonstrating reasonable attempts to collect; and claims being made within four years[4].

It also notes that subsection 231(5) extends this to agents making supplies under a subsection 177(1.1) election[4].

Two observations, ours.

These are cumulative. Commentary on the recent decision describes the standard as strict compliance[1], and the case discussed below turned on failures of two of them.

And several are evidentiary rather than substantive. Whether the debt is genuinely uncollectible is not the only question; whether the supplier can prove the steps is a separate one, and it is where claims fail.

Arm's Length Excludes The Common Case

A condition that removes a large share of small business bad debts.

Commentary states that the supplier and recipient must deal at arm's length, and that non-arm's length relationships, such as family ties or corporate control, disqualify the claim[4].

Three consequences, ours.

The receivable a small business is most likely to write off is often owed by a related entity. A sister company that failed, a family member's venture, a corporation under common control.

Those are exactly the debts the condition excludes, and the exclusion is structural rather than evidentiary. No amount of documentation cures it.

And the policy reason is straightforward. Where the parties are not at arm's length, the decision to leave an invoice unpaid is not an independent commercial one, and a recoverable tax would be an invitation.

Our own observation is that this condition is worth checking first, before any effort goes into evidencing collection attempts. It is binary, it is knowable immediately, and a claim that fails it fails regardless of how well the rest is documented.

No Tax Remitted, No Tax Back

A condition that follows from the design.

Commentary explains that the rule excludes any supplies listed as exempt supplies under Schedule V or zero-rated supplies under Schedule VI, because both exempt and zero rated supplies exempt the supplier from charging GST/HST from the customer, and the rationale is that if no GST/HST was remitted in the first place, then the supplier is not entitled to a bad debt refund[3].

It notes the distinction between the two categories: the supplier of a zero-rated supply is entitled to claim an input tax credit on goods or services acquired in the course of making it, while the supplier of an exempt supply is not[3].

Two observations, ours.

The logic is sound and it means this relief is unavailable to whole sectors this publication has written about, including exempt medical practices, childcare operators and residential landlords. They never remitted, so there is nothing to recover.

And it matters for businesses making mixed supplies, which several articles in this series describe. A single customer account can contain taxable, zero-rated and exempt items, and only one of those categories generates a claim.

That mixing problem is not merely a computational nuisance. It is the reason CRA rejected the approach discussed two sections below.

A Law Firm That Lost

The recent decision, reported from commentary.

Commentary describes Heydary Green Professional Corporation v The King, 2026 TCC 69, in which the appellant was a law firm in the midst of a complex winddown after internal fraud, which deducted over $37,000 in GST/HST related to at least fifty unrecovered client accounts[1].

It records that despite the firm's difficult circumstances and the fact that it had made some effort to get back some of the debts, the Tax Court dismissed the appeal, reinforcing the strict compliance standard required for section 231[1].

We have not read the decision and take this from commentary. Commentary describes three critical pitfalls identified in the reasoning[1]. We obtained only the first two, and set them out in the next two sections. We do not speculate about the third.

Two observations, ours.

The facts are as sympathetic as they get. A firm winding down after internal fraud, fifty unpaid client accounts, some collection effort made. The claim still failed.

And the appellant was a law firm, which is to say a business with in-house familiarity with evidentiary standards and record-keeping. If the standard defeated them, a contractor with a shoebox is not going to clear it by instinct.

Evidence Specific To Each Debt

The first pitfall, and the one that shapes how a claim must be built.

Commentary records that the appellant failed to prove that each specific debt had become bad, being evidence specific to each individual debt that it had pursued the debt and made best efforts to collect it[1].

Three consequences, ours.

The unit of proof is the individual debt, not the write-off decision and not the year.

A business claiming across fifty accounts needs fifty evidentiary trails, each showing that this debt was pursued and this debt is bad.

And general circumstances do not substitute. The firm's winddown and the fraud it had suffered were real, and did not establish that any particular client's account was uncollectible.

Our own observation is that this is what makes the relief expensive to claim. On a portfolio of small debts, the documentation effort per dollar recovered can exceed the recovery, which is a rational reason many businesses do not bother and a bad reason to claim without the file.

The practical response is to build the evidence during collection rather than at write-off. A collection process that records what was attempted and when produces the file automatically.

The Write-Off Cannot Be Skipped

The second pitfall, which is formal rather than substantive.

Commentary records that a business must actually write off the debts in its formal books of account, and this step cannot be skipped[1].

Another source states the requirement as the debt being formally written off in the supplier's books in accordance with generally accepted accounting principles[4].

Three observations, ours.

A provision or allowance is not a write-off. Reducing a receivable through a doubtful accounts allowance leaves the debt on the books.

Nor is a decision to stop chasing. The requirement is an entry, in the formal records, removing the amount.

And the timing of that entry matters beyond the accounting, because as the sections below set out, the limitation period runs from the write-off.

So the write-off is doing three jobs at once: it is a condition of the claim, it is the event that starts the clock, and it is the record an examiner will ask to see. A business that has satisfied itself commercially that a debt is gone but has not made the entry has met none of the three.

The Claim Is Per Supply, Not Per Account

A structural point from a CRA interpretation, and the one we think is least understood.

CRA considered a proposed formula applying total tax charged to an amount written off, and ruled that the proposed formula cannot be used to calculate the adjustment outlined in subsection 231(1), because subsection 231(1) requires the company to establish that the tax or the consideration for a supply, in whole or in part, has become a bad debt, and as the account balances relate to more than one supply and include items which are neither, the formula does not achieve this result[5].

Three consequences, ours.

The statutory unit is a supply. The provision speaks of the tax or consideration for a supply becoming a bad debt.

A customer account balance is not a supply. It is an aggregate, and CRA's objection is precisely that it aggregates.

And the phrase include items which are neither is doing a lot of work. An account balance routinely contains things that are not consideration for a taxable supply at all.

This aligns exactly with the first pitfall in the recent decision. Both point the same way: the claim is built from individual supplies, each established as bad, not from a balance.

What The Blended Approach Gets Wrong

An illustration, constructed and computed by us to show why the objection is substantive rather than technical.

Take a customer account containing: a taxable invoice of $12,000; a second taxable invoice of $18,000; a zero-rated export sale of $9,000; $1,400 of interest charged on the overdue balance; and a deposit of $3,000 applied against it.

The account balance is $37,400.

The blended approach takes that balance and extracts tax at 13/113, giving roughly $4,303.

The correct approach looks only at the taxable supplies actually established to be bad, being $30,000, and computes tax of $3,900.

The difference on this small account is roughly $403 claimed on a basis CRA has rejected.

Two observations, ours.

The overstatement arises because the balance contains three things that never carried tax: a zero-rated supply, interest, and a deposit that reduces the balance without being a supply at all.

And on a real receivables ledger, that mixture is normal rather than contrived. Interest on overdue accounts is common, deposits and credits are common, and mixed supply profiles are common in several sectors this publication has written about.

We flag that the interpretation dates from 1995 and refers to GST at 7 percent, and that our figures use an assumed current rate.

Reasonable Attempts To Collect

The evidentiary condition, with authority older than the recent decision.

Commentary states that the supplier must demonstrate reasonable attempts to collect the debt, and cites Paquin v The Queen, 2004 TCC 597, in which the court emphasized that insufficient collection efforts disqualify the claim[4].

We have not read that decision either and report it from commentary.

Two observations, ours.

The requirement has been settled for over twenty years, and the 2026 decision described above is applying an established standard rather than raising the bar.

Which means a business that has been claiming these adjustments without a collection file has been exposed for as long as it has been doing it, subject to the ordinary assessment limits.

Our own view of what the standard practically requires: correspondence chasing payment, a record of what was said and when, and a documented decision that further pursuit was not warranted. The last of those is the one businesses skip, and it is the one that converts abandonment into a reasoned conclusion.

The Four Year Window

The limitation, and the event it runs from.

Commentary states that claims must be made within four years of the date the bad debt was written off[4], and that the four-year limitation period is specifically enumerated in subsection 231(4)[3].

Three consequences, ours.

The clock runs from the write-off, not from the invoice. So a receivable chased for three years before being written off still has its full window.

Which means delay in pursuing a debt does not cost the claim, and may help it, since the pursuit is the evidence.

But a debt written off and then forgotten expires on schedule whether or not anyone noticed the entitlement existed.

Our own observation is about which businesses lose money here. A company that had a bad year four or five years ago, wrote off a batch of receivables, and never made a claim has a window that has closed or is closing, on amounts that are still identifiable in its own ledger.

That is a specific and checkable question for any business with a history of write-offs: were the corresponding adjustments ever claimed, and are any of the remaining years still open.

A Difference In How That Is Stated

A discrepancy we report rather than resolve.

One source states the limit as within four years of the date the bad debt was written off[4].

Another states it as a maximum of four years from the end of the reporting period in which you wrote off the debt[6].

Those are not the same. The second gives a period running from a period end rather than from a date, which for most registrants is marginally longer and is anchored to a filing period rather than to a bookkeeping event.

We have not read subsection 231(4) and do not resolve which formulation is correct.

Two observations, ours.

For a claim made well inside the window the difference is immaterial.

For a claim at the boundary it decides the matter, and anyone in that position needs the provision rather than either source.

We record it because a difference of this kind between two professional sources is exactly the sort of thing that gets smoothed over in a summary, and the smoothing is where an error enters.

Agents And The Election

An extension worth noting for businesses that sell through others.

Commentary notes that subsection 231(5) extends the relief to agents making supplies under a subsection 177(1.1) election[4].

A CRA interpretation sets out the pattern it addresses: the agent, in making the taxable supply on behalf of the principal, accounts for the tax collectible on the supply in its net tax and remits any positive amount; the agent records an accounts receivable in its books for the consideration and the tax payable by the recipient; and at a future date the receivable is determined to be uncollectible and the agent writes off the bad debt in its books of account[7].

The interpretation frames the question as whether the agent is entitled to recover the tax portion, and notes that the agent-principal relationship must be established and will be based on fact and principles of law, referring to the CRA policy on agency[7].

Two observations, ours.

The mechanism follows the remittance. Whoever accounted for the tax in their net tax is the person with something to recover.

And the threshold question is agency itself, which this publication has addressed separately and which the same policy statement governs. Whether a person is an agent or a principal decides this as it decides several other things.

Quebec Has Its Own

A jurisdictional note.

Commentary states that both the federal Excise Tax Act and Quebec's Act respecting the Quebec sales tax contain provisions to remedy the unfairness of remitting tax on a bad debt, specifically subsection 231(1) and section 444 respectively, allowing a supplier to deduct or credit the tax related to an uncollectible receivable once conditions are met[6].

It notes the Quebec term for the relief, a credit for tax on a bad debt[6].

Our own observation is narrow: a Quebec supplier has two claims to make rather than one, and the conditions of each need to be satisfied on their own terms. We did not research the Quebec provision beyond confirming it exists.

Remitting Is Easy, Recovering Is Not

The structural observation this article closes on, which is ours.

The obligation to remit arises on issuing an invoice. It requires no evidence, no arm's length test, no formal entry and no deadline management. It happens automatically as a consequence of billing.

The right to recover requires, cumulatively: a taxable supply, an arm's length recipient, a formal write-off in the books, evidence specific to each individual debt of pursuit and best efforts, a computation per supply rather than per account, a claim in the correct box, and a filing within four years.

Three consequences.

The asymmetry is not accidental. The remittance rule exists to prevent deferral, and the recovery rule exists to prevent that relief being abused, and each is defensible on its own.

But the combined effect falls on the supplier that has already lost the money, and requires it to spend more to recover part of what it never received.

And the businesses least able to build a fifty-account evidentiary file are the small ones for whom the amounts matter most.

Our own conclusion is a practical one rather than a complaint. The claim is real and it is worth roughly a third of the total recovery on a bad debt. What it needs is a collection process that produces its own evidence, so that the file exists by the time it is needed.

What The Auditor Actually Examines

The enquiry in practice. This section is our own analysis.

Whether the amount was claimed as a deduction from net tax or added to input tax credits, which is visible on the return.

The write-off entries in the formal books, and their dates.

Evidence of collection effort on each debt claimed, rather than in general.

The relationship with each debtor, against the arm's length condition.

The composition of each account written off, for zero-rated items, exempt items, interest and credits.

Whether a blended rate was applied to a balance, which CRA has rejected.

Subsequent recoveries, which reverse the relief where an amount previously written off is later received.

The third item is where the recent decision was decided, and it is the hardest to produce after the fact. Collection evidence exists at the time or it does not exist at all.

What Records Survive

A collection file per debt, recording what was attempted, when, and the response.

The formal write-off entry, dated, in the books of account rather than in a schedule.

A documented conclusion that further pursuit was not warranted, with reasons.

The composition of each written-off account, separating taxable supplies from everything else.

The tax actually charged on each of those supplies, from the original invoices.

Evidence of the arm's length relationship, where a debtor might appear connected.

The return on which the adjustment was claimed, cross-referenced to the write-off period.

What To Do

Treat an unpaid invoice as two recoveries. The income tax deduction is one; the sales tax remitted on the same invoice is a separate claim on a separate return.

Check arm's length first. It is binary, immediately knowable, and defeats the claim regardless of documentation.

Claim on line 107, not through input tax credits. It is a deduction from net tax, not a credit, and the difference is visible on the return.

Build the file per debt, during collection. The recent decision turned on the absence of evidence specific to each individual account.

Make the write-off a formal entry. A provision is not a write-off, and a decision to stop chasing is not one either.

Compute per supply, not per balance. CRA has rejected a formula applied to account balances because they aggregate supplies and include items that are not supplies at all.

Strip out interest, credits and non-taxable supplies before computing anything.

Record why pursuit was abandoned. That document converts giving up into a reasoned conclusion, and it is the one businesses skip.

Review your write-off history. The window runs from the write-off, so amounts from four or five years ago may still be open or may have just closed.

Get the limitation right at the boundary. Our sources state it differently, and a claim near the edge needs the provision rather than a summary.

The Limits Of This Analysis

Several caveats matter. This is not tax advice. Everything is stated as verified in August 2026 and requires confirmation. We did not read section 231 directly and take its content from commentary and CRA interpretations. We did not read the decision in Heydary Green Professional Corporation v The King, 2026 TCC 69, and take its facts and reasoning from two commentary sources with near-identical wording, treated as one line of commentary; those sources describe three critical pitfalls and we obtained only two, and we do not speculate about the third. We did not read Paquin v The Queen, 2004 TCC 597, and report it from commentary. Our sources state the four year limitation differently, one running from the date of write-off and one from the end of the reporting period in which the write-off occurred, and we expressly decline to resolve which is correct. One CRA interpretation relied on dates from 1995 and refers to GST at 7 percent. We did not work through the income tax conditions for a bad debt deduction, the distinction between doubtful debt reserves and bad debt deductions, the treatment of subsequent recoveries beyond noting that they reverse the relief, the position of a supplier using the quick method or a simplified accounting method, the Quebec provision beyond confirming it exists, or the interaction with the assignment or factoring of receivables. The mixed-account illustration is constructed by us and is not drawn from any source. All arithmetic is our own, uses assumed rates, and is illustrative only. The two-recoveries framing, the blended-approach illustration and the asymmetry analysis are our own.

Related Reading

Corporate Tax Partner Time Has No Cost Where an overstated work in progress figure is corrected the following year as a bad debt. Sales Tax Recovering Input Tax Credits The mechanism this one is not, and the documentary requirements that do not apply here. Sales Tax Whose Expense Was It The same agency policy that decides whether an agent can recover tax on a written-off receivable.

Frequently Asked Questions

Can we get back GST/HST on an invoice the customer never paid?

Subsection 231(1) provides for it, subject to strict conditions: a taxable supply, an arm's length recipient, a formal write-off in the books, demonstrated collection efforts, and a claim within four years. It is a deduction from net tax rather than an input tax credit.

Where does it go on the return?

On line 107, as a deduction from net tax. Commentary is explicit that it is not included in the total for computing input tax credits. Putting the right amount in the wrong box inflates the credit total against purchase records that will not support it.

Can we take our aged receivables listing and apply the tax fraction?

No. CRA rejected exactly that approach, on the basis that the provision requires establishing that the tax or consideration for a supply has become bad, and account balances relate to more than one supply and include items that are neither. The claim is built per supply.

Our sister company owes us money and cannot pay. Does that count?

Commentary states that the supplier and recipient must deal at arm's length, and that non-arm's length relationships such as family ties or corporate control disqualify the claim. It is worth checking first, because no amount of documentation cures it.

How much evidence do we actually need?

Evidence specific to each individual debt that it was pursued and that best efforts were made. In the 2026 decision a law firm winding down after internal fraud, claiming across at least fifty accounts and having made some collection effort, still lost. General circumstances did not establish that any particular account was bad.

We wrote off some accounts a few years ago. Is it too late?

Possibly not. The window is four years and runs from the write-off rather than the invoice, so amounts from several years ago may still be open. Our sources differ on whether it runs from the date of write-off or the end of that reporting period, which matters only at the boundary.

References

1. Tax & Trade Blog. GST 201: Bad Debt GST Recovery Has Strict Rules, on section 231 of the Excise Tax Act offering relief in the form of an ability to recover GST/HST previously remitted on debts that have become uncollectible; on the decision in Heydary Green Professional Corporation v The King, 2026 TCC 69, in which the appellant was a law firm in the midst of a complex winddown after internal fraud that deducted over $37,000 in GST/HST related to at least fifty unrecovered client accounts; on the Tax Court dismissing the appeal despite the firm's difficult circumstances and its having made some effort to recover some of the debts, reinforcing the strict compliance standard required for section 231; on the reasoning highlighting three critical pitfalls; on the first being that the appellant failed to prove that each specific debt had become bad, being evidence specific to each individual debt that it had pursued the debt and made best efforts to collect it; and on the second being that a business must actually write off the debts in its formal books of account, a step that cannot be skipped. Note: a tax law firm publication dated May 2026. We did not read the decision, and obtained only two of the three pitfalls described. taxandtradelaw.com
2. Lexology. GST 201: Bad Debt GST Recovery Has Strict Rules, cited for the same statements regarding section 231, the Heydary decision and the pitfalls identified. Note: wording near-identical to reference 1; treated as the same line of commentary rather than independent corroboration. lexology.com
3. Rotfleisch & Samulovitch PC. Bad Debt GST Refund: Excise Tax Implication of Bad Debt Write-Offs, on a supplier having to remit GST/HST whether or not it is able to collect, so that a supplier may bill a customer, fail to collect either the principal or the tax, and still have to remit based on gross billings; on subsection 231(1) allowing the supplier to claim a refund against a past remittance where the account is written off as a bad debt; on subsection 231(1) operating by a deduction from net tax as computed under subsection 225(1) rather than as an input tax credit; on the adjustment being calculated on line 107 of the GST return rather than included in the total for computing input tax credits; on the rule excluding supplies listed as exempt under Schedule V or zero-rated under Schedule VI, with the rationale that if no GST/HST was remitted in the first place the supplier is not entitled to a refund; on the distinction that a supplier of a zero-rated supply may claim input tax credits while a supplier of an exempt supply may not; on the requirement that the supply was made for consideration; and on the four year limitation period being specifically enumerated in subsection 231(4). Note: a tax law firm publication. goodservicetax.com
4. Tax Partners. Bad Debt GST Refund and Excise Tax Implications of Bad Debt Write-Offs, on suppliers remaining obligated to remit GST/HST where a customer does not pay, with subsection 231(1) providing a mechanism for recovery; on bad debt refunds operating as a deduction from net tax under subsection 225(1) rather than as input tax credits, reported on line 107; on the conditions requiring a taxable supply that is not zero-rated or exempt, the supplier being a registrant with a valid business number, the supply having been made to a recipient as defined in subsection 123(1) who is contractually liable for payment, the supplier and recipient dealing at arm's length with non-arm's length relationships such as family ties or corporate control disqualifying the claim, the bad debt being formally written off in the supplier's books in accordance with generally accepted accounting principles, the supplier demonstrating reasonable attempts to collect, and claims being made within four years of the date the bad debt was written off; on subsection 231(5) extending the relief to agents making supplies under a subsection 177(1.1) election; and on Paquin v The Queen, 2004 TCC 597, in which the court emphasized that insufficient collection efforts disqualify the claim. Note: an accounting firm publication dated January 2025. We did not read Paquin. taxpartners.ca
5. Canada Revenue Agency GST/HST Interpretation 11610-4, 19 April 1995, Bad Debts: Use of a Formula for Calculating the Adjustment, as reproduced by a tax publication service, on a ruling that the proposed formula could not be used to calculate the adjustment outlined in subsection 231(1), because subsection 231(1) requires the company to establish that the tax or the consideration for a supply, in whole or in part, has become a bad debt, and as the account balances relate to more than one supply and include items which are neither, the formula does not achieve that result. Note: accessed through a secondary reproduction; it refers to GST at 7 percent, dating it plainly. taxinterpretations.com
6. Mackisen. Customer Didn't Pay, But You Remitted GST/QST: Now What?, on a supplier having to report and remit tax on an invoice by the due date even if no cash is received, which prevents businesses from using unpaid invoices to defer tax; on both the federal Excise Tax Act and Quebec's Act respecting the Quebec sales tax containing provisions to remedy the unfairness of remitting tax on a bad debt, specifically subsection 231(1) and section 444, allowing a supplier to deduct or credit the tax related to an uncollectible receivable once conditions are met, known in Quebec as a credit for tax on a bad debt; and on there being a maximum of four years from the end of the reporting period in which the debt was written off. Note: an accounting firm publication. Its statement of the limitation period differs from that at reference 4, and we do not resolve the difference. mackisen.com
7. Canada Revenue Agency GST/HST Interpretation HQR0000654, 30 October 1997, Subsection 177(1.1) of the Excise Tax Act, as reproduced by a tax publication service, on the pattern in which an agent making a taxable supply in the course of its commercial activities on behalf of a principal accounts for the tax collectible in its net tax and remits any positive amount, records an accounts receivable in its books for the consideration and the tax payable by the recipient, and at a future date determines the receivable to be uncollectible and writes off the bad debt in its books of account; on the question whether the agent is entitled to recover the tax portion; on the agent-principal relationship having to be established on fact and principles of law, with the concept of agency addressed in the CRA policy paper on determining the meaning of agent and agency; and on amendments to sections 177 and 231 having received Royal Assent on 20 March 1997. Note: accessed through a secondary reproduction; a 1997 interpretation referring to amendments of that year. taxinterpretations.com

This article is provided for general informational purposes and is not tax advice. Section 231 was not read directly. The 2026 Tax Court decision discussed was not read, and only two of the three pitfalls its commentators describe were obtained. The four year limitation is stated differently by two sources relied on and the difference is not resolved here. All arithmetic is the authors' own and is illustrative only.