The rate of GST to charge for a taxable supply of goods or services is determined by the province in which the supply is made, which is referred to as the place of supply. Unfortunately, this is not always a straightforward determination.
Determining the place of supply is important because some provinces (including B.C.) charge provincial sales taxes separately from GST, while others (the “participating provinces”) have combined their provincial sales tax regime with the federal GST to create a “harmonized sales tax”, or HST (for example, Ontario, which charges HST at 13%). As a result, some goods and services have lower sales taxes applied to them in the non-participating provinces.
Because of this, the federal government has developed rules to determine where the supply of goods and services were made. Keep in mind this will only be an issue if you are selling or buying goods and services to (or from) a customer/supplier located in Canada but outside of your province of residence.
A summary of the rules:
Purchase of Goods
The place of supply rule is based on the province in which legal delivery of the goods to the purchaser occurs, so if you order a product from Ontario for delivery in B.C. you will be charged GST at 5%, rather than Ontario’s HST rate of 13%.
Purchase of Vehicles
Generally, the place of supply for vehicles is based on the province where the vehicle is registered to the new owner (e.g. if the vehicle will have B.C. license plates, the purchaser will be charged B.C. tax rates).
Purchase of Real property (Land and Buildings)
Not surprisingly, the place of supply rule is based on the province where the property is situated.
Purchase of Services
Generally, the location of the recipient of the services determines the rate of GST to be charged. For example, if an Ontario-based company engages a B.C. firm to provide accounting services, sales taxes will be charged as though the service was provided in Ontario. If the purchaser is a non-resident of Canada, the transaction will generally be GST/HST-exempt.
In cases where the location of the recipient is not known to the provider of the service, GST will be charged based on the location of the service provider (you may be wondering “when could this happen?”; think of a web-based editor that receives documents via email, proofreads them, and emails the edited document back to the customer).
Of course, the above is just an overview of the rules and does not address every potential scenario. If determining the place of supply is relevant in your business we recommend you seek guidance from an accounting professional, as the government has made this a characteristically complex area of taxation.
For assistance on this or any other taxation or accounting matter, please contact the team at Cloutier Matthews at 250-338-7367.