Do I charge GST or HST on the sale of goods and services to another province?

Allan Madan, CA
 Jan 26, 2011
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“Do I charge GST or HST on sales to another province?” If you are a nationwide business, this may be a question that you are asking. Each province has its own rate, and it can be difficult to try and make sense of the sometimes confusing information. Worse still, the federal government has strict regulations and you may face penalties if you fail to charge the appropriate tax. Don’t fear! Allan Madan Chartered Accountant will show you the way. By the way, if you’ve made a mistake in your HST filing you can visit our resource on how do I amend my HST return?

Before we take a look at what the rules are, let’s do a little bit of background work. The Harmonized Sales Tax (HST) is the combination of Federal GST and Provincial PST into a single value added tax. Not all provinces have HST, but the ones that do are:

  • Ontario
  • Newfoundland
  • Nova Scotia
  • New Brunswick
  • Prince Edward Island

The provinces that charge GST and their own Provincial Sales Tax are:

  • Saskatchewan
  • Manitoba
  • Quebec

In Alberta, the provincial government only levies GST and does not have a Provincial Sales Tax. Therefore, it is the lowest sales tax jurisdiction among all the provinces. Did you collect HST, but did not register for an HST number on time? Visit our resource on I collected HST but didn’t register for an HST number on time, what should I do?

HST/GST on the Sale of Goods

gstsalegoods
The first issue in our examination of HST and GST is the sale of goods. In general, GST and HST is charged in the province where the goods are delivered. It is important here to differentiate between legal delivery and physical delivery. “Legal delivery” is a term that signifies when the buyer takes legal responsibility for the good from the seller. This is different from physical delivery, which occurs when the buyer actually receives the good. In most situations, the place of physical delivery determines what taxation laws are applied. To learn more about GST/HST, please visit the CRA’s website Goods and services tax/harmonized sales tax (GST/HST).

Also, you do not need to be the one shipping the goods. If physical delivery occurs in the province that the buyer is in, then their province dictates the taxation rules.

To explain how this works, let’s look at a couple examples.

  1. A bank orders cheques to be shipped by the supplier directly to all its branches across Canada. In branches located in participating provinces, HST is applied. In non-participating provinces, GST or QST is applied.
  2. A store in Nova Scotia agrees to sell t-shirts to a purchaser in Prince Edward Island. Because physical delivery occurs in PEI, the supply of goods is made in PEI and is subject to HST at a rate of 14%.
  3. A store in Alberta agrees to sell computers to a company in Ontario. In their contract, they specify that the purchaser is responsible for all damages. However, the company will still cover all shipping costs. Although legal delivery occurs in Alberta, physical delivery occurs in Ontario. Therefore, Ontario’s HST rate of 13% will be applied.
  4. A supplier in Nova Scotia makes a supply of headphones to an Ontario company. However, the company in Ontario specifies to their supplier that they want the headphones shipped directly to their clients in Arlington, Texas. The supplier in Nova Scotia sends the headphones by courier to the address in Texas. Although the supply is made in Nova Scotia, it is exempted from tax as an export. This is because the good is being sent to an address outside Canada.

Services – Do I charge GST or HST on sales to another province?

gsthstotherprovince

This is an interesting question, because services are taxed differently than goods. Generally, the customer’s business address determines the rules of taxation. If there is no billing address, then the place where most of the service is performed determines the taxation rules. If there is no business address and the service is performed equally in two provinces, then the one with the higher tax rate determines the taxation rules. If the customer is a non-resident of Canada, then the GST of HST is not applicable. For more information on charging and collecting sales tax, please visit Overview of charging and collecting sales.
To understand this concept, let us look at some examples.

  1. A design firm in Quebec agrees to do some web design for a hotel in Newfoundland. The work is done entirely in their offices in Montreal. However, the business address of the hotel in Newfoundland is in St. John’s. Since the hotel’s address is in Newfoundland, the supply of the service is made in Newfoundland and HST will apply at a 13% rate.
  2. A proofing, editing, and translation company in Ontario interfaces with its clients. It does not send its documents directly to its customers, but sends them through email. In fact, it never asks for the business address of its clients. Because most of the service is performed in a participating province, the supply is considered to be made in Ontario and thus HST will apply at 13%.
  3. A videogame company has studios in Ontario and Quebec. It decides to create an online videogame on a client’s website, corresponding with them through email. The client pays through PayPal, and has no business address. If work is performed equally in Ontario and Quebec, then the province with a higher rate (Ontario at 13%) will determine the rate.

Did you receive acupuncture? Curious about whether you have to pay HST? Visit our resource on Does HST have to be collected/paid on acupuncture treatment?





Disclaimer

The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.

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Comments 16

  1. Hello.

    I started a business last year, and applied for and HST number. I collected HST for my sales. However, my business wasn’t as successful as I thought, and I gave up on it. I still have a couple of invoices to send, but I’m wondering if I have to bother with the HST just because I have the number and have been collecting it. If I have sales less than $30k a year and I have a number, do I have to collect HST because I have the number? Can I just ignore it and send out the invoices without HST?

    1. Dear Mr. Morrisey,

      You would have to deregister the account. The information you need to do so is here: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/bspsbch/cncllng/menu-eng.html. The CRA should tell you when the effective date that you are deregistered, until which you are supposed to keep collecting. Otherwise, you will be liable for any HST not collected. Also, collecting it from clients or customers after the fact usually doesn’t go well!

      Alternatively, you may consider keeping the account open. That way, you can file nil returns once a year. If you decide to get into any other business as self-employed, you can still use the same account.

      Regards,
      Allan Madan and Team

  2. I own a marketing firm in which we provide services to people all over Canada. We help other companies with creating company logos and graphics as well as improve their marketing for their website. If we are helping with website marketing for a company in another province, do we charge GST and HST according to the province we reside in? Or are the GST and HST based according to where the company we are providing the service is?

    1. Hi Aaron,
      It seems that most of the work is web-based and does not require it to be sent to the clients. If this is true then you base the GST and HST on the place in which the service is performed. So in this case the GST and HST will be that from where your company resides.
      Regards,
      Allan Madan and Team

  3. We are currently providing sub contracting work for a Quebec based firm with the work being done in Quebec. Do I charge the Ontario HST for this?

  4. I own my own bookkeeping business in BC, and I have new clients coming from Ontario for which I supply training for Quickbooks Online,as well as performing monthly reconciliations for them, I just want to confirm, because it is a service performed in BC, that I will only charge these clients GST and not HST. Up until this month I did not need to register for GST.

    1. Hi Marlene,

      GST/HST is charged according to the billing address of the client. So long as the client’s address is in Ontario, you will have to charge HST (13%) at Ontario rates, irrespective of where the services are performed.

  5. I am setting-up a dropship ecommerce business that will be registered in Quebec. The clients will place an order on my website for physical goods, I will process their payment, then order from a supplier that will deliver the goods directly to my client, under my name. I do not see or touch the goods, but pay the supplier and deal with the taxes:
    1. If my client is in Ontario, and the supplier is in another province (not QC), what sales tax do I charge?
    2. If my client is in Ontario, and the supplier is in Ontario, what sales tax do I charge?
    3. If my client is in Ontario, and the supplier is in Quebec, what sales tax do I charge?
    My guess here is that in all 3 cases I need to charge HST of 13%, but I am confused by reading about not having to charge provincial tax to residents of other provinces. However Ontario has both taxes rolled into HST, so how I am not supposed to charge provincial tax? Please help, this is quite confusing.

    1. Hi Alex,
      Sales tax (GST + PST, or HST) is charged based on the province of delivery of the goods. In Ontario, both provincial and federal sales taxes are combined into one – HST at rate of 13%. HST collected is reported on a GST/HST return.

  6. I AM a small graphic design business in Quebec. ..what tax do I charge for Web design services done on a website for a small holistic company in ontario. the web design services are done online here in my Quebec office.

  7. Hello Allan,

    Thanks for the useful information you posted on this page. However, I still have a question regarding my situation and it would be great if you could please help clear my confusion.

    I am an Immigration Consultant (registered my business in ON – not Canada wide) and will be starting my business soon. But before I charge my future clients, I like to understand the taxation aspect fully. I understand that I cannot charge any tax to overseas clients, but for example, if a client is in some other province (regardless of participating in HST), do I still charge them ON HST (as I am only registered in ON) or that province (HST or GST)?

    Please note, I am not sending any documents to the client physically but I have to obtain a clients address (personal or business) for my Retainer Agreement and Invoice. I am providing consultation in person/on call/email for clients in ON, and on call and email only. The paper work is done in ON and I am not sending or delivery any documents to clients physically. Everything on email.

    I have tried to search everywhere but I am unable to find this answer. I hope I can get some help from you.

    Thanks,

    1. Hi Mark,

      Charge GST or HST based on the client’s address. For example, charge HST for Ontario customers, and GST for BC customers. Then complete a combined GST/HST return for the reporting period (quarterly or yearly).

  8. Hello
    I work for a consulting company in Ontario. One company we work with is another consulting company based out of BC. They contract out work to us. We perform work for their clients across the country including site visits and meetings in multiple provinces as well as reports sent via email. We are billed by the consulting company in BC regardless of where their client is located. Should we be paying 5% BC tax all the time even if their client we are completing the work for is in Ontario?

    1. Hi Jamie,

      Charge GST or HST based on the billing address of your customer. Your customer is the person / entity that is paying you. From what you have told me, your paying customer is in BC, and so 5% tax (GST) should be charged by you to your BC customer.

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