Do You Charge GST/HST to Out-of-Province and US Customers?

Canadian sales tax rules trip up a lot of small business owners, especially when they start selling outside their home province or to customers in the United States. The rules are not intuitive, and a wrong assumption in either direction can mean charging tax you did not need to collect or missing tax you were required to remit. This post explains how it works. It is not tax advice. For your specific situation, run the details by your accountant.

What Owners Get Wrong

The most common mistake is assuming GST/HST follows your location, not your customer's location. A business in Ontario might assume it charges 13 percent HST on everything. But if you sell to a customer in Alberta, the place of supply matters. Alberta has no provincial sales tax component. The correct rate for a taxable supply to an Alberta customer may be 5 percent GST, not 13 percent HST.

The second mistake is applying HST to US customers. Exports of goods and most services to non-residents are generally zero-rated under the Excise Tax Act. Zero-rated does not mean exempt from the GST/HST system entirely. It means the rate is 0 percent. You still report the supply on your GST/HST return, but you charge nothing. And because the supply is zero-rated rather than exempt, you can still claim input tax credits on the costs you incurred to deliver it.

The distinction between zero-rated and exempt matters. An exempt supply does not get charged tax, but you also cannot recover the GST/HST you paid on inputs. A zero-rated supply does not get charged tax either, but you can recover your input costs. For a business with significant costs delivering services to US clients, that difference can be meaningful.

The CFO Perspective

I see this come up most often with service businesses that start picking up US clients. The owner has been charging HST to everyone because that is what they set up when they registered for GST/HST, and they never updated the billing setup when the customer base expanded. The fix is usually straightforward once the situation is identified, but it can create a reconciliation headache if it has been going on for a year or two.

The place-of-supply rules for services can be complex. For digital services, consulting, and other intangible services, the place of supply is generally where the recipient is located. A Canadian consulting firm providing services to a US company would typically treat that as a zero-rated export. The invoice goes out with no tax charged, the supply is reported on the GST/HST return at zero, and the firm claims ITCs on its Canadian costs as normal.

For interprovincial sales within Canada, the rules vary by whether the supply is a good or a service, and the specific province involved. Quebec has its own QST system. British Columbia, Manitoba, and Saskatchewan have provincial sales taxes that are separate from GST. If you are regularly selling to customers in multiple provinces, your accountant should map out which rates apply to which customers in your specific product or service category.

What to Do About It

1. Know where your customers are located. Your invoicing software should capture the customer's province or country. If it does not, fix that now. You cannot apply the correct tax rate without knowing the place of supply.
2. Ask your accountant to map your place-of-supply rules. Give them a list of the provinces and countries you sell to, and the type of supply (goods, services, digital services). Get a clear answer on which rate applies to each customer type. Do this once properly rather than guessing every invoice.
3. Set up your invoicing software correctly. Most platforms, including QuickBooks and FreshBooks, let you assign a tax rate by customer location. Once the rules are mapped, automate the application. Manual tax rate selection is where errors happen.
4. Track zero-rated export supplies separately. Even though you charge zero, you should be recording US and international sales as zero-rated supplies on your GST/HST return, not as non-taxable or exempt. The distinction matters for your ITC claims.
5. Review your current setup at least annually. If you have expanded to new provinces or started selling to US clients, your tax configuration may be out of date. A quick annual check with your accountant is much cheaper than a retroactive correction.

A Note on GST/HST Registration Thresholds

If your total worldwide taxable supplies are under $30,000 in a 12-month period, you may qualify as a small supplier and are not required to register for GST/HST. Once you cross that threshold, registration is mandatory. This applies to Canadian revenue. US revenue in zero-rated exports counts toward the threshold calculation even though no tax is charged. If you are approaching or crossing $30,000 in combined revenue, talk to your accountant about registration timing.

Sales tax rules across provinces and borders are one of those areas where a one-hour conversation with your accountant pays for itself many times over. Book a free call at peterxiacpa.com/book.

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