CRA GST/HST Construction Industry Audit — Montreal CPA Firm Near You: Defending Contractors, Subcontractors, ITCs, and Place-of-Supply

A CRA GST/HST Construction Industry Audit targets contractors, subcontractors, builders, tradespeople, and construction companies for sales-tax compliance.
Construction is one of CRA’s highest-risk industries because it involves:
• complex subcontractor chains
• high volumes of invoices
• equipment rentals
• progressive billing
• holdbacks
• cash transactions
• interprovincial work
• new housing rules

CRA performs these audits to verify GST/HST charged, ITCs claimed, supplier validity, and GST/HST on subcontractor services. Audit amounts often reach six or seven figures.

Mackisen CPA Montreal specializes in defending construction audits by verifying subcontractor registration, reconstructing ITCs, analyzing place-of-supply rules, and preparing CPA-certified audit binders to remove CRA assumptions.

Legal Foundation

• Excise Tax Act ss.165–169 — GST/HST rules for taxable supplies & ITC claims
• Excise Tax Act s.221 — requirement to collect GST/HST
• Excise Tax Act s.286 — documentation and recordkeeping
• Case law:
– Northwest Company Inc. — invoices must meet strict criteria
– Bell Canada — supplier registration is essential
– CGI v. Canada — cross-province GST/HST rules must reflect commercial reality

Learning insight: Construction files fail when invoices or subcontractor data are incomplete — CRA denies ITCs instantly.

Why CRA Audits Construction Companies

CRA targets construction because it sees:
• subcontractors operating without valid GST/HST numbers
• cash payments & undocumented expenses
• large ITCs for materials & equipment
• incorrect tax rates for interprovincial projects
• new-build GST/HST errors
• aggressive write-offs or mixed-use equipment
• input tax credit refunds every month
• unreported taxable supplies

Learning insight: Construction is a documentation-heavy industry — CRA audits it because many companies don’t keep perfect records.

CRA Construction Audit Process

1. CRA requests:
   – subcontractor lists
   – invoices, contracts, proof of payment
   – vendor GST/HST numbers
   – material purchase records
   – equipment leases
   – payroll, T5018 slips
   – site logs, delivery slips

2. CRA tests:
   • validity of each subcontractor
   • ITC documentation
   • GST/HST rates on supplies
   • cross-province compliance
   • progressive billing vs completion

3. CRA proposes adjustments.

4. Mackisen CPA prepares a technical rebuttal.

Learning insight: CRA uses a sampling audit, scaling adjustments across all invoices — errors snowball without CPA defense.

Mackisen CPA’s Construction Audit Defense Strategy

• verify subcontractor GST/HST registration
• rebuild missing invoices & delivery slips
• create ITC matrices for materials & equipment
• defend progressive billing & holdback calculations
• correct place-of-supply errors
• document builder vs non-builder status
• reconstruct job-site logs
• prepare CPA-certified audit files
• negotiate removal of unjust penalties

Learning insight: Construction audits are won through perfect documentation, not explanations.

Common CRA Findings

• ITCs denied due to missing supplier GST numbers
• subcontractors with invalid registration
• personal-use equipment claimed as business
• GST/HST not charged on taxable construction services
• mixed-use building misclassified
• new-home GST/HST errors
• progressive billing reported incorrectly

Real-World Results

• General contractor avoided $820,000 reassessment after Mackisen CPA validated subcontractor registrations.
• Builder reversed $540,000 GST/HST adjustment through ITC reconstruction.
• Civil engineering firm avoided penalties after fixing interprovincial place-of-supply errors.

Why Mackisen CPA Montreal

35+ years of defending construction firms — we understand subcontractor chains, GST law, and documentation like CRA does.

Call to Action

If CRA is auditing your construction company, call Mackisen CPA Montreal:
📞 514-276-0808 | 📧 info@mackisen.com | 🌐 mackisen.com

Learning conclusion:

A Construction GST/HST Audit tests ITCs, subcontractors, billing, and tax rates. Mackisen CPA ensures your file is clean, defensible, and compliant.