What constitutes "double brokerage"?

Henry

Active Member
10
Ok. Understand. I do some over flow work for a broker in Milton. In that case, i do not charge GST i think even though he is a broker.
 

loaders

Site Supporter
30
No, no no. Interlining has nothing to do with taking freight from a load broker other than the fact that you don't bill GST.
 

Michael Ludwig

Well-Known Member
20
If the shipment was entirely in Canada, a carrier would bill the broker without GST and the broker would then bill his customer at the applicable GST ...
GST/HST can be a minefield where carrier's, brokers, and customers are concerned. One which I am surprised the fed's haven't looked into a little further, because it would be a huge cash cow for them.
Strictly speaking, a load broker is a service provider, not a carrier, and should bill their Canadian based customers GST for all the freight they move on behalf of that customer.
The relationship between brokers and carriers has always been that of "interlining" which is GST exempt. The definition of interlining is one carrier working for another carrier, and even at that, the originating carrier needs to supply a bill of lading in their name for the load to qualify as an interline load.
Technically speaking, and unless someone can provide evidence (rule) to the contrary, a load broker with a basement office and a telephone, without a CVOR or actual equipment, facilitating a move for Canada Bread (just an example) from Mississauga to Los Angeles, would need to bill Canada Bread for the GST on the load broker's profit portion, if the load broker used an escrow account. If the load broker did not use an escrow account, then the load broker would have to bill GST for the entire amount, as there would be no simple, clear cut, method of determining the load broker's profit portion.
Unless I am wrong in my understanding of the GST regulations, a Revenue Canada investigation on the issue, and subsequent enforcement, would pretty much gut the load broker community in this country. It would add an extra layer of administration on the customer's part to claim back that GST, and it would lay bare exactly how much load brokers upcharge the transportation service.
 

Jim L

Well-Known Member
20
GST/HST can be a minefield where carrier's, brokers, and customers are concerned. One which I am surprised the fed's haven't looked into a little further, because it would be a huge cash cow for them.
Strictly speaking, a load broker is a service provider, not a carrier, and should bill their Canadian based customers GST for all the freight they move on behalf of that customer.
The relationship between brokers and carriers has always been that of "interlining" which is GST exempt. The definition of interlining is one carrier working for another carrier, and even at that, the originating carrier needs to supply a bill of lading in their name for the load to qualify as an interline load.
Technically speaking, and unless someone can provide evidence (rule) to the contrary, a load broker with a basement office and a telephone, without a CVOR or actual equipment, facilitating a move for Canada Bread (just an example) from Mississauga to Los Angeles, would need to bill Canada Bread for the GST on the load broker's profit portion, if the load broker used an escrow account. If the load broker did not use an escrow account, then the load broker would have to bill GST for the entire amount, as there would be no simple, clear cut, method of determining the load broker's profit portion.
Unless I am wrong in my understanding of the GST regulations, a Revenue Canada investigation on the issue, and subsequent enforcement, would pretty much gut the load broker community in this country. It would add an extra layer of administration on the customer's part to claim back that GST, and it would lay bare exactly how much load brokers upcharge the transportation service.
I agree. HST should be charged on all freight movements and the freight payor can include that amount as an ITC credit on their return along with all other parties through the process. That way the complete 'service' part of the freight move will be captured by the government. If there is an international portion to this, the customs broker should be able to recapture the HST on the international freight portion at that time they do the customs entry.
The relationship between a broker and a carrier is not the same as interlining. For a shipment to be interlined, there has to be a clear beginning and end point and more than one carrier needs to be involved. The broker is not involved in physically moving the freight and therefore provides a service but is not a carrier.
I have had this discussion many times with brokers in respects to freight between Ontario and Quebec. This has no component of international shipment so HST or GST (depending on the sale) will apply. I have to believe that if brokers were required to obtain HST/GST accounts and manage them, there would be another level of complexity for those running out of the basement of their house on their cell phone. The HST number would also be another item that we could ask for when doing a reference check.

This is just another example of a lack of enforcement of the laws. A lack of enforcement only hurts the law abiding citizens. Those with a true intention to do things properly would obtain accounts and manage them properly and ask the freight payors for HST/GST.
 

Michael Ludwig

Well-Known Member
20
I don't think HST/GST exemption is a factor in the customer+broker+carrier/international shipment scenario.
The load broker is a service provider regardless of the origin and destination of the freight, and subsequently if the load broker's customer is Canadian, the HST/GST is applicable as per the province of the customer's principal place of business.
My thoughts are it is only a matter of time before some upwardly mobile bean counter working at Revenue Canada latches onto this and sees it for the cash cow that it is. I would expect they will get their eyes opened widely to the taxable opportunities in the transportation business as they investigate, and begin to enforce, Driver Inc.
Consider if you will, the enormous tax liability to the basement broker if he did 1 million worth of business each year for 7 years, and has no clear distinction between freight rates and service rates. That's a 910,000 dollar tax liability !!! And, if that broker is not incorporated, or is not insulated from the company in some way, shape, or form, s/he is so screwed.
Geez ... that's a scary friggin' thought !!!!
 

loaders

Site Supporter
30
A quick review of the CRA website regarding transportation and HST indicates that anyone providing “freight transportation services” is considered a carrier whether they are licensed as a carrier or not. There is nothing in the current regulations that requires the identification of the commission a freight broker charges and incorporates into their rates to their customers. Now if Michael and Jim could just get back to work running their companies and quit trying to find ways for CRA to complicate my business, it would brighten this gloomy, rainy day. Lol!!!
 

Jim L

Well-Known Member
20
Now if Michael and Jim could just get back to work running their companies and quit trying to find ways for CRA to complicate my business, it would brighten this gloomy, rainy day. Lol!!!
I'm always thinking of ways to better our industry. If I can get the industry running better then running my company would be much easier. Just imagine a day when I don't have to chase down money from some used to be carrier turned basement broker who double brokers the freight from large US brokerages with no intention of paying.

In this case, I'm sure that @loaders would have no issue if he had to charge HST, subtract the carriers HST and submit the difference every quarter if it meant that there are better competitors in the industry.
 

roadroad

New Member
2
But why trucking companies are taking loads from other trucking companies if they are not a registred broker ?
 

wesward

Member
10
They say it is over flow
But even over flow and cant handle on own trucks I would think is double brokering.

Thoughts?
 

Freight Broker

Well-Known Member
30
The thinking is that trucking companies are 'real' businesses with real tangible assets.. thus no need for a bond as buildings and trucks etc can be tracked down easily enough. Freight brokers, on the other hand, can disappear like a fart in the wind.. with no trace left behind.. hence the bond which effectively obligates their principal (s) to make good on debts owing in the event the brokerage goes bad. Of course the truth is somewhat different.. carriers can vanish into thin air too.. has happened to me several times... and very few brokers operate with no assets. Sure.. they don't own trucks.. but... most have offices.. office equipment etc.. either leased or owned. If you broker loads then you're required (in the US) to have a broker authority and a bond regardless.. doesn't matter if you own zero trucks or 10 thousand.
 

Shakey

Site Supporter
20
They say it is over flow
But even over flow and cant handle on own trucks I would think is double brokering.

Thoughts?
you can call it whatever you like it's the same thing Wesward, if you broker a load that you took from a carrier or broker it is double brokering, if you are not billing the beneficiary owner of goods to the movement you are double brokering..............................you can't make it not by telling yourself it it co-brokering, overflow, my driver ate the truck keys so I need you to run this load for me
 

loaders

Site Supporter
30
I think over the years, we have all heard some pretty creative excuses as to why a load “had”to be double brokered. The usual driver/equipment shortages that resulted in your load being handled by someone other than the party you gave it to. The thinly stretched relationship between the original carrier and the one hauling the load, like “oh, it’s my brother-in-law’s truck” or, “it’s alright, we operate out of the same building”. Don’t get me wrong, not all reasons for double brokering are nefarious or fraudulent. Sometimes the original carrier is really trying to rectify the situation to everyone’s benefit. Remember however, it is the broker who should be making the final decision about who is hauling his customers freight, or at the very least, be an active participant in that decision process.
 

wesward

Member
10
Question?
If a carrier has a year contract for a broker to move freight
The pricing of freight drops way low so then the carrier would make more money giving to other carrier and not move their own assests
Is this double brokering?

Look around people carriers are doing it daily
 
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