Place of supply: which province’s rate do you charge?

Charging the wrong provincial rate is one of the most common GST/HST errors in a small business, and one of the easiest to correct once you know which question to ask. The question is never “where am I?” It is “where was this supply made?”

The rates, and which provinces they apply in

Once you know the place of supply, the rate follows mechanically. A zero-rated supply is taxed at zero per cent everywhere in Canada. For other taxable supplies the CRA sets out the rates as:

British Columbia is a non-participating province, so a supply made in BC carries 5% GST — and, where it applies, BC provincial sales tax is charged separately on top rather than being harmonised into a single rate.

Goods: follow the delivery

For a sale of goods, the place of supply is determined by where the goods physically end up under the terms of the deal:

• If the supplier delivers the goods or makes them available to the customer, the place of supply is the province where they are delivered.
• If the supplier mails or couriers the goods, it is the province they are sent to.
• If the supplier ships the goods to a destination specified in the contract for carriage, or transfers them to a common carrier retained on the customer’s behalf for that purpose, it is the province they are shipped to.

The CRA’s own example makes the point: a store in Alberta sells goods to a purchaser in Ontario, and although legal delivery occurs in Alberta under the terms of the agreement, the supplier ships to an Ontario address — so delivery is considered to occur in Ontario and the Ontario rate applies. Conversely, if the customer collects the goods at the store, the place of supply is where the store is.

There is even a rule for goods that never arrive: the place of supply is the province where they were supposed to be delivered.

Services: follow the address

Services do not move, so the rule attaches to the customer instead. The general rule is that a supply of a service is made in the province where the supplier obtains a home or business address of the recipient in the ordinary course of its business, and that address is in that province.

If the supplier does not obtain such an address but obtains another single Canadian address of the recipient, that address is used. Where no Canadian address is obtained at all, the supply is made in a participating province if the services performed in Canada are performed primarily — more than 50 per cent — in participating provinces, and it is made in the province where the greatest proportion is performed. If the greatest proportions tie between participating provinces, the highest of those rates applies. If the services are performed primarily in non-participating provinces, or equally between the two groups, the supply is made in a non-participating province and GST at 5 per cent applies.

The service rules that override the general one

Personal services

A personal service is generally one that is all or substantially all — 90 per cent or more — performed in the physical presence of the individual receiving it. A haircut is a personal service. Advisory, consulting and professional services are specifically not personal services, so most accountants, lawyers and consultants stay on the general address rule. For personal services, the supply is made where the service is primarily performed, with the highest applicable rate applying to ties between participating provinces.

Services in relation to real property

These follow the property. If the service relates to real property in Canada situated primarily in participating provinces, HST applies at the rate of the province where the greatest proportion of the property sits. If the property is primarily in non-participating provinces, or split equally, GST at 5 per cent applies.

Services in relation to goods that stay put

A service performed on tangible personal property that remains in the same province while the Canadian part of the service is performed generally follows the province where that property is situated. Repair work sits here.

Leases, rentals and vehicles

A lease, licence or similar arrangement giving continuous possession for three months or less uses the same delivery-based test as a sale. For more than three months, each lease interval is treated as a separate supply, and the place of supply for each interval is based on the ordinary location of the goods at the time of that supply — so a leased asset that moves provinces mid-term can change rate partway through. Specified motor vehicles have their own rule tied, on certain conditions, to the province where the vehicle is registered.

Two practical checks

First, confirm the supply is actually taxable before worrying about the rate. If it is exempt, no tax applies at all; if it is zero-rated, the rate is zero everywhere. Our guide to zero-rated versus exempt supplies sorts that out first.

Second, make sure your invoicing system actually applies the rule. Most accounting software sets a default tax code per customer — get the customer record right at setup and the rest looks after itself. If you are still deciding whether to register at all, start with the GST/HST registration guide, and use the GST/HST calculator to check individual invoices. Sellers shipping goods across the country should also read our notes for online sellers, where the delivery-based rule bites hardest.

This article is general information, not tax advice for your specific situation. Tax rules and CRA administrative positions change — confirm anything that affects a decision with the CRA or with us first.