Remote work broke the intuition most owners were running on. Your desk, your incorporation and your bank account no longer tell you what to charge. This guide covers the address test for services, the tie-breakers when a client has several addresses, and where foreign clients drop out of the system entirely.
Key Takeaways
- The rate follows your client’s address, not your office.
- Undercharging is your problem: the Canada Revenue Agency assesses the seller for the shortfall.
- Goods follow delivery, real property follows location, services follow the recipient.
- Work for a genuine non-resident is often zero-rated, which is not the same as exempt.
What the Place of Supply Rules Actually Decide
Two separate questions sit behind every invoice. First, is the supply made in Canada at all, which section 142 of the Excise Tax Act (ETA) answers. Second, if it is, in which province the supply is made, which Schedule IX of the ETA and the harmonized system regulations answer. Both the goods and services tax and its harmonized counterpart run on the same tests. The Agency’s Technical Information Bulletin B-103, Harmonized Sales Tax: Place of Supply Rules for Determining Whether a Supply Is Made in a Province, works through them in detail. Only the second question sets your rate. None of this touches whether you must register at all, which our guide to HST for small business covers separately.
Get it wrong and the cost is yours. If you charge 5 per cent on a supply made in a participating province, the Agency assesses you for the missing provincial portion plus interest, and chasing the client for it a year later is a commercial problem, not a tax remedy. Overcharge instead and you have collected tax you must still remit, with an unhappy client and a credit note to issue.
The General Rules for Supplies of Services
The general place of supply rules that govern services are shorter than their reputation. Where you obtain an address in Canada for the recipient of the supply, meaning a single home or business address gathered in the normal course of business, the supply of a service is made in that province. Your own location is irrelevant. So is the place where the services are performed, for most ordinary commercial work.
| Situation | Rate you charge |
|---|---|
| Toronto consultant, client’s business address in Calgary | 5 per cent |
| Calgary consultant, client’s business address in Toronto | 13 per cent |
| Halifax designer, client’s business address in Halifax | 14 per cent |
| Winnipeg bookkeeper, client’s business address in Moncton | 15 per cent |
Specific rules override that default in a handful of cases. Services in relation to real property follow the location of the property. Personal services performed in the physical presence of the individual, such as a haircut or a training session, follow the place of performance. Freight and passenger transportation services each run on their own regime. So does the supply of a telecommunication service, where the test turns on the billing location rather than on a head office, and a wrong call there repeats on every monthly invoice. Editing and translation services sit with the general address test instead, and translation services delivered entirely by email are no different from a document couriered across town. Estate work is special too: if you supply the services of a trustee, check the bulletin before setting a rate. Where your work is none of the exceptions, the address test governs, and it governs whether you deliver by video call, email or in person. Sole practitioners billing across provinces should read this alongside filing self-employed taxes in Ontario, since the two filings share the same revenue records. The Agency’s own overview of place of supply sets out those variations in full.
How to Determine the Place of Supply With Two Addresses
Clients rarely present one clean address. A national retailer signs from a head office in one province and receives your work in another. The supply is considered to be made at the address most closely connected with it, and where nothing else separates them, at the address the supplier obtains last.
Where you hold no Canadian home or business address at all, the test moves to where the greatest proportion of the service is performed. If two or more participating provinces tie on that measure, the supply lands in the province with the highest HST rate. That default is deliberately unattractive, which is the point.
Ask what the nature of the supply is before you look at any address. Bundle an installation with a licence and the place of supply would differ between the two lines on one invoice, because each element can be a separate supply. The application of place of supply rules happens element by element, not invoice by invoice.
A practice heuristic worth adopting: the address that decides the matter is almost always the one in the engagement letter, not the one in a billing email or an email signature. When we review sales tax exposure for service firms, the first document requested is the signed contract, because that is exactly where an auditor starts. Firms that leave the client address off their engagement letters end up arguing from invoices instead, which is a much weaker position.
Participating Province vs Non-Participating Province
A participating province charges a single harmonized rate. Everywhere else you charge 5 per cent federal tax, and any provincial sales tax runs on a separate track with separate registration.
| Province | Combined rate on your invoice |
|---|---|
| Ontario | 13 per cent |
| Nova Scotia | 14 per cent |
| New Brunswick, Newfoundland and Labrador, Prince Edward Island | 15 per cent |
| Alberta and the three territories | 5 per cent |
| British Columbia, Saskatchewan, Manitoba | 5 per cent, plus provincial tax if separately registered |
| Quebec | 5 per cent, plus Quebec sales tax if separately registered |
Quebec deserves a flag of its own. Billing a client there does not put you outside the harmonized system, and Quebec sales tax is administered by Revenu Quebec under its own registration rules. Firms billing mostly into 5 per cent jurisdictions should also test whether the Quick Method of accounting still works for them, because the remittance rate depends on where your sales land.
The Supply of Tangible Personal Property, Digital Goods and Real Property
Goods or services: the label decides which test applies, and conflating the two is the error we correct most often. Goods follow physical movement, so a supply of tangible personal property is made in the province where you deliver it or make it available to the buyer. The ship-to address governs and the bill-to address does not. Selling from a Mississauga warehouse to a Vancouver customer is a 5 per cent transaction, even where the supply of the service that installs the item lands somewhere else.
Intangibles, including software licences, memberships and downloads, run on a related address test tied to where the rights may be used. The specific place of supply rules for intangible personal property look first at any restriction written into the agreement, so the place of supply for intangible property can differ from the customer’s head office. A supply of real property is the simplest of the three, because the supply of property is made where the land or building sits, no matter who buys it or from where. Where one contract mixes property and services, price the parts separately, since property or services can land in different provinces.
Non-Resident Clients: When Taxable Supplies Become Zero-Rated Exports
Services supplied to a non-resident person are generally zero-rated under Schedule VI, Part V, section 7 of the ETA, and advisory, consulting or professional services get their own zero-rating in section 23. Zero-rated means you charge nothing and still recover the tax on your own costs, which is why the distinction from exempt treatment matters so much. Our comparison of zero-rated and exempt supplies works through that difference.
Three traps swallow more claims than any others. Section 7 carves out services rendered to an individual while that individual is located in Canada. Subsection 132(2) treats a non-resident who carries on business in Canada through a permanent establishment as resident for supplies made through it, so a United States parent with a Toronto branch is not automatically a client located outside Canada. And services connected to real property or goods situated in Canada stay taxable no matter who pays. Creators billing foreign platforms hit this constantly, which we cover further in our guide to YouTube and Twitch taxes.
Evidence decides these files. Keep the client’s incorporation details, the address you bill, and proof of whether the recipient is ordinarily located in Canada or outside of Canada. Where the recipient is considered to be outside Canada, the supply can be zero-rated. Where your records cannot show it, the assessment follows.
Place of Supply Questions Canadian Businesses Ask
What is the place of supply rule?
It is the set of tests that decides where a sale is treated as taking place, and therefore which rate applies. For most services the sale is treated as occurring in the province of the recipient’s address that the supplier obtains in the normal course of business.
How do I determine the place of supply for a service?
Start with the Canadian home or business address you hold for the client. If you hold more than one, use the address most closely connected with the work. If you hold none, look to where the greatest proportion of the work is performed.
What is the difference between place of supply and location?
They are usually different, and only the first one sets your rate. A developer in Vancouver working entirely from home for a Toronto agency makes an Ontario supply and charges 13 per cent, because the recipient’s address governs rather than the keyboard’s location.
Do foreign customers pay GST/HST?
Usually not, because most services supplied to a genuine non-resident are zero-rated exports. Confirm the client is a non-resident under the Act first, and keep evidence of that status on file, because the burden of proving a zero-rated supply sits with the supplier.
How do place of supply rules apply to online and digital businesses?
The same tests apply, and the address you obtain for the customer still decides the province for most digital services. Intangible property tied to Canadian rights follows any restriction written into the agreement instead. Selling into Canada from abroad brings the simplified registration regime into play on top of all this.
Why are place of supply rules important for businesses?
They set the rate you must charge, and the Agency assesses the supplier rather than the customer for any shortfall. One wrong tax code repeated across a year of invoices becomes a material liability with interest attached. Getting the setup right at onboarding costs nothing, while fixing it later costs the provincial portion plus interest.
What if I charged the wrong provincial rate?
Correct it going forward immediately, then quantify the historical exposure before the Agency does. Undercharged tax remains your liability with interest, and a voluntary correction is a far better conversation than an assessment. Our CRA representation team handles those files regularly.
The Bottom Line
The rules reward businesses that capture one piece of information properly at onboarding: a client’s real address.
- Put a full client address on every engagement letter and keep it current.
- Set the tax code by the client’s province, never by your own.
- Ship-to governs goods; location governs real property.
- Document non-resident status before you zero-rate anything.
- Review your rate table whenever a province changes its rate.
Multi-province billing turns a simple business into a compliance exercise fast, and the exposure compounds quietly across years. Where you incorporate and where you invoice pull in different directions, which is one reason our corporate tax advisory work usually starts with the client list rather than the return. If you suspect the wrong rate has been going out for a while, get in touch with our team before the next filing.
