Under the Canadian GST/HST regime, the notion of place of supply has a key impact on the rate of tax that must be charged – and even if tax needs to be charged at all. How you navigate these rules can have a significant impact on your business. Learn about the rules and how they might apply to your business.
General Application of the GST/HST
The general rule under the goods and services tax seems simple: If you make taxable supplies of goods and services in Canada, then you must collect and remit GST. If the supplies are made outside of Canada, then the supplies are zero-rated and you do not need to charge any GST.
However, in practice, the applicable rate is not the same throughout Canada. If the supply is made in an HST-participating province (such as Ontario, New Brunswick, Nova Scotia, Newfoundland, and Prince Edward Island) then you must charge the harmonized sales tax instead. If the supply is made in the province of Quebec, then the Quebec sales tax applies.
The place of supply has a major impact on how you will apply the GST/HST/QST in your everyday operations. If you have a traditional brick-and-mortar store, the rule is simple enough – you can easily identify where the supply is made. In many other cases, you need to apply special rules.
Distinguishing Between Types of Supplies
The law provides four different sets of rules to determine the place of supply. The rule to follow in each case depends on the type of goods or services that you are supplying: tangible goods, services, intangible personal property, and real property.
If you are selling tangible goods, then the key element is the place where the goods are delivered. Under the law, the supply is deemed to be made in the province where the supplier delivers the property or makes it available to the buyer.
For services, the rule is not as straightforward. In general, the service is deemed to be performed at the address of the recipient of the service and the taxes are charged accordingly. However, there are exceptions for recipients with several addresses in different provinces and for certain specific types of services, such as transportation services, computer-related services, and internet access services.
The supply of intangible property, such as a licence to use copyrighted material, is made in the province where the material is used. Here again, there are special rules that apply when the intangible personal property can be used in several provinces.
The supply of real property is deemed to be made in the province where the property is located. If a supply involves property situated in more than one place, then each part of the supply is deemed to be a separate supply, and tax is charged accordingly.