CRA GST/HST Staffing Agency & Recruitment Audit — Montreal CPA Firm Near You: Defending Agency Fees, Contractor Billing, ITCs & Place-of-Supply

A CRA GST/HST Staffing Agency & Recruitment Audit examines whether your staffing firm, recruitment agency, placement company, temp agency, or contractor-supply business correctly charged and remitted GST/HST on placement fees, temporary staffing, contractor markups, payroll billing, and HR services.

This industry is heavily targeted by CRA because:
• staffing involves intermediary services,
• workers may be employees or independent contractors,
• place-of-supply rules vary by province,
• billing structures differ (markup vs flat fee vs hourly billing),
• ITCs can be large on payroll, insurance, and marketing costs,
• cross-border recruitment adds complexity,
• and many staffing firms rely on subcontractors whose GST numbers may be invalid.

Mackisen CPA Montreal specializes in defending staffing audits by clarifying taxable vs exempt services, validating GST/HST on placement fees, reconstructing ITC proof, and building CRA-ready audit binders.

Legal Foundation

Excise Tax Act

• s.165 — GST/HST applies to taxable staffing & recruitment services

• s.169 — ITC documentation standards

• Schedule IX — place-of-supply rules (where the client is located)

• s.221 — supplier must charge and collect GST/HST

• s.141.01 — allocation rules for mixed-use expenses

• s.123(1) — definitions of “service,” “consideration,” “commercial activity”

Case Law

• Royal Bank v. Canada — ITCs must have perfect documentation

• ADP Canada — payroll support services are taxable

• Great-West Life — exemptions do not apply to administrative HR services

• CIBC World Markets — classification must follow statutory definitions

Learning insight: All staffing/recruitment services are taxable, with no exemptions — CRA audits focus on accuracy, not eligibility.

Why CRA Audits Staffing & Recruitment Firms

CRA selects staffing agencies when it detects:
• inconsistent GST/HST charged on placement fees
• out-of-province clients → wrong GST/HST rate
• contractors operating under invalid GST/HST numbers
• large ITCs on marketing, subcontractors, insurance
• temp employees treated as exempt (incorrect)
• payroll reimbursements unclear (reimbursement vs consideration)
• HR consulting mixed with staffing services
• international placements with incorrect zero-rating logic
• recruitment fees not registered for GST/HST
• mismatches between payouts and GST returns

High-risk business models:

• temp agencies

• IT recruitment firms

• healthcare staffing

• industrial labour-supply

• subcontractor networks

• offshore recruiting for Canadian employers

• payrolling / PEO (Professional Employer Organization) structures

Learning insight: CRA assumes billing + GST logic errors unless the agency proves otherwise with perfect documentation.

CRA Staffing Agency Audit Process

1. CRA requests:
   – placement agreements
   – contracts with employers & contractors
   – invoices for staffing fees
   – payroll & payrolling summaries
   – subcontractor invoices
   – bank statements & GL
   – proof of payment
   – GST/HST numbers for all contractors/subcontractors
   – timesheets & assignment logs

2. CRA tests:
   • GST/HST charged correctly
   • place-of-supply rules per province
   • subcontractor eligibility for ITCs
   • payroll reimbursements vs taxable supply
   • HR consulting vs staffing (taxable difference)
   • cross-border rules for foreign candidate sourcing
   • accuracy of ITCs for overhead & recruitment expenses

3. CRA issues Proposed Audit Adjustment

4. Mackisen CPA prepares a complete audit defense file.

Learning insight: CRA performs a contract-by-contract audit — wording matters.

Mackisen CPA’s Staffing Audit Defense Strategy

• review all placement contracts to classify services correctly
• rebuild GST/HST charging logic per province (5%, 13%, 15%)
• validate GST/HST registration numbers for contractors & vendors
• prepare Recruitment Tax Matrix (service type → tax status)
• rebuild ITC documentation for:
– job boards
– software (ATS, payroll, CRM)
– advertising
– subcontractors
– insurance
– office costs
• defend payroll reimbursements as non-taxable (where applicable)
• correct place-of-supply rules for national clients
• prepare CPA-certified audit binder
• negotiate penalties and interest reduction

Learning insight: Staffing audits are won through contract analysis + tax logic + documentation — we bring all three.

Common CRA Findings in Staffing Audits

• GST/HST not charged on placement or recruitment fees
• wrong GST/HST rate due to out-of-province clients
• subcontractor invoices invalid → ITCs denied
• payrolling transactions misclassified
• foreign recruitment incorrectly zero-rated
• “HR consulting” used to avoid GST/HST (incorrect)
• GST claimed on exempt employee benefits (not allowed)
• reimbursements improperly treated as taxable or vice versa
• multiple GST/HST numbers used incorrectly

Learning insight: CRA’s biggest focus is supply classification and contract wording.

Real-World Results

• A large staffing agency avoided a $610,000 GST/HST reassessment after Mackisen CPA corrected place-of-supply errors and validated contractor GST numbers.
• A healthcare staffing firm reversed a $280,000 ITC denial when we reconstructed payroll vs contractor classification.
• An IT recruiting company avoided penalties by defensively documenting foreign placements as properly zero-rated.
• A subcontractor-based industrial staffing group cleared audit findings through contract restructuring and document proof.

Learning insight: CRA backs down when the agency’s tax logic is precise, documented, and contract-supported.

SEO Optimization & Educational Value

Primary keywords: GST/HST staffing agency audit, CRA recruitment audit, Mackisen CPA Montreal, GST audit temp agency
Secondary keywords: contractor GST number audit, payroll reimbursement GST, HR services GST audit, place-of-supply recruitment audit

Learning insight: Staffing industry GST issues generate high SEO activity — ideal content for visibility and credibility.

Why Mackisen CPA Montreal

With 35+ years defending staffing, recruitment, payrolling, and contractor-supply firms, Mackisen CPA Montreal is Québec’s top authority on GST/HST staffing audits.
We understand staffing contracts, provincial tax rules, contractor structures, and CRA audit methodology better than anyone.

Learning insight: Staffing audits succeed when contracts + invoices + ITCs + tax logic all align — our specialty.

Call to Action

If CRA is auditing your staffing agency, recruitment fees, contractor networks, or payrolling structure, contact Mackisen CPA Montreal immediately:

📞 514-276-0808
📧 info@mackisen.com
🌐 mackisen.com

Learning Conclusion:

A CRA GST/HST Staffing Agency & Recruitment Audit tests taxability of services, place-of-supply rules, ITCs, subcontractor validity, and payroll structures. Mackisen CPA Montreal ensures your agency’s operations are fully defended and audit-proof.