Common GST/HST Errors and Audit Triggers

Introduction
Understanding the most common GST/HST errors and audit triggers is essential for businesses, freelancers, consultants, e-commerce sellers, landlords, and corporations. Sales tax is one of the most heavily audited areas in Canada because errors happen frequently and involve government trust money. Whether you are registered for GST/HST, QST, or both, even small mistakes can lead to penalties, interest, denied input tax credits (ITCs), or full CRA/Revenu Québec audits. This guide outlines the most common GST/HST errors and audit triggers so businesses can correct issues early and stay fully compliant.

Legal and Regulatory Framework
Common GST/HST errors and audit triggers are governed by the Excise Tax Act, the Tax Administration Act of Québec, and CRA/Revenu Québec administrative policies. Businesses must:

• register for GST/HST/QST when required
• charge the correct tax rate
• remit sales tax on time
• issue compliant invoices
• maintain proper documentation for ITCs
• apply place-of-supply rules accurately
• report all taxable revenue

Any deviation from these rules can trigger an audit or reassessment. Many businesses unintentionally commit errors simply because GST/HST rules are complex and vary across provinces.

Most Common GST/HST Errors
Businesses repeatedly make the same sales tax mistakes. The most common GST/HST errors include:

1. Charging the Wrong Tax Rate
Businesses often charge GST instead of HST or forget to apply QST in Québec. Errors frequently occur with interprovincial services and digital sales.

2. Failing to Register on Time
Businesses surpass the $30,000 small supplier threshold without registering. CRA then applies retroactive GST/HST assessments.

3. Claiming ITCs Without Proper Receipts
ITCs require:

• supplier name and GST number
• invoice date
• amount before tax
• tax charged
• proof of payment

Missing any of these can cause denial of ITCs.

4. Mixing Personal and Business Expenses
Personal expenses claimed as ITCs are automatically denied and often flagged for full audit review.

5. Incorrect GST/HST Codes in Accounting Software
Many businesses set up QuickBooks, Shopify or Stripe incorrectly, leading to long-term systemic errors.

6. Not Remitting Sales Tax Collected
This is one of the most serious GST/HST errors. Sales tax collected is trust money, and failure to remit may result in penalties, garnishments or director liability.

7. Wrong Place-of-Supply Rules
Businesses often tax based on their location instead of the customer’s location.

8. Ignoring QST Rules in Québec
QST registration, invoicing and remittance are separate from GST/HST. Many businesses fail to comply with both.

9. Missing Filing Deadlines
Late filings trigger automatic interest and penalties—regardless of circumstances.

10. Incorrect Treatment of Real Estate Transactions
GST/HST errors in real estate—especially assignment sales and new builds—are among the most audited areas in Canada.

Understanding these common GST/HST errors and audit triggers can prevent costly mistakes.

Why CRA and Revenu Québec Target These Issues
CRA and Revenu Québec focus on sales tax audits because:

• GST/HST/QST is trust money
• mistakes lead to government revenue loss
• many small businesses lack proper bookkeeping
• digital and interprovincial sales create confusion
• real estate transactions frequently involve major tax errors

Audit triggers include:

• large GST/HST refunds
• mismatched GST/HST vs income tax filings
• incorrectly charged sales tax on invoices
• repeated late filings
• unusually high ITC claims
• anomalies flagged by CRA’s automated risk systems
• sales tax collected but not remitted
• unregistered businesses with high revenue
• incorrect QST treatment for Québec customers

Understanding these triggers reduces audit risk substantially.

Mackisen Strategy
Mackisen CPA provides a full compliance system specifically designed to eliminate common GST/HST errors and audit triggers:

• reviewing invoicing systems for correct tax codes
• reconciling GST/HST/QST collected vs remitted
• verifying ITC eligibility and documentation
• analyzing place-of-supply rules for services and goods
• correcting QST and GST/HST differences for Québec operations
• reviewing Shopify, Stripe, Amazon, and POS tax settings
• preparing sales tax returns monthly, quarterly or annually
• filing voluntary disclosures for past mistakes
• defending clients in CRA and Revenu Québec audits

Our approach ensures complete and audit-safe compliance with sales tax rules nationwide.

Real Client Experience
Many clients come to Mackisen after CRA or Revenu Québec identify common GST/HST errors and audit triggers:

• A consultant in Ontario charged GST instead of HST for three years. CRA reassessed over $11,000. We corrected filings and reduced penalties.
• A Québec business filed QST but forgot GST. Revenu Québec alerted CRA. Mackisen registered GST and filed all missing returns.
• An e-commerce seller overclaimed ITCs due to missing receipts. CRA denied credits. We reconstructed documentation and refiled.
• A contractor collected GST but never remitted it. CRA issued garnishments. Mackisen negotiated payment arrangements.
• A digital creator charged no tax to Québec customers. Revenu Québec issued QST assessments. We structured proper registration and corrected past filings.

These cases demonstrate the importance of addressing common GST/HST errors and audit triggers proactively.

Common Questions
Business owners frequently ask:

• Do I need to register for GST/HST and QST separately?
Yes, Québec has its own QST system.

• Why were my ITCs denied?
Usually due to missing details on invoices or personal expenses.

• Can I fix past GST/HST errors?
Yes, through voluntary disclosure.

• Do I charge GST/HST based on my location or the client’s?
Client’s location (for services and digital products).

• Why am I being audited?
Often because of mismatched data, incorrect tax rates or large ITC claims.

• Are real estate issues common audit triggers?
Yes—especially flips, assignments and new builds.

Understanding these answers helps businesses manage common GST/HST errors and audit triggers effectively.

Why Mackisen
With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses stay compliant while recovering the taxes they’re entitled to. Whether you're filing your first GST/QST return or optimizing multi-year refunds, our expert team ensures precision, transparency and protection from audit risk. When guiding clients on common GST/HST errors and audit triggers, Mackisen provides full compliance checks, system setups, documentation support and expert audit defense.