CRA GST/HST Wholesale & Distribution Audit — Montreal CPA Firm Near You: Defending Inventory Flows, ITCs, Drop-Shipping & Interprovincial Tax Rates

A CRA GST/HST Wholesale & Distribution Audit targets businesses involved in importing, wholesaling, warehousing, distributing, and supplying goods to retailers, pharmacies, grocery chains, convenience stores, e-commerce sellers, and industrial clients.

Wholesale is one of CRA’s top audit categories because the sector involves:
• large and recurring ITCs
• interprovincial shipping (ON/BC/AB/Atlantic rules)
• zero-rated exports without full documentation
• drop-shipping (complex supplier/recipient rules)
• vendor rebates & chargebacks
• warehouse fulfillment
• consignment inventory
• missing CBSA import documentation
• large cash-flow movements
• sales through multiple channels (B2B, distributors, Amazon FBA)

Mackisen CPA Montreal specializes in defending wholesale audits by mapping supply chains, validating ITCs, rebuilding import/export documentation, and preparing CRA-ready audit binders.

Legal Foundation

Excise Tax Act

• s.165 — GST/HST on taxable supplies of goods

• s.169 — ITC documentation requirements

• s.221 — obligation to collect GST/HST

• s.218–218.1 — self-assessment on imported goods and digital services

• Schedule VI — zero-rating on exported goods

• Schedule IX — place-of-supply rules for domestic shipping

• s.142–143 — deeming rules for supplies performed inside/outside Canada

Case Law

• Honeywell — exports must be proven with documentation

• Royal Bank v. Canada — strict invoice details required for ITCs

• Nortel Networks — substance of supply determines tax treatment

• UPS/FedEx Case — shipping charges follow taxability of supply

Learning insight: Wholesale taxation depends entirely on documentation + correct place-of-supply logic.

Why CRA Audits Wholesalers & Distributors

CRA flags wholesale & distribution companies when it detects:
• large ITC claims for inventory, containers, packaging, and freight
• missing CBSA B3 import entries
• incorrect tax rates for interprovincial shipments
• zero-rated exports with missing shipping proof
• dropshipping transactions misclassified
• customer locations unclear
• merchant deposits not matching GL
• consignment inventory not properly tracked
• vendor rebates improperly treated
• mixed-use warehouse expenses incorrectly claimed

High-risk models:

• importers

• distributors for big box stores

• Amazon FBA wholesalers

• health & supplement distributors

• food & beverage wholesalers

• construction material suppliers

• industrial parts suppliers

• pharmacy & medical supply distributors

• e-commerce drop-ship wholesalers

Learning insight: CRA assumes ITC overclaims and export errors unless robust evidence is provided.

CRA Wholesale Audit Process

1. CRA requests:
   – invoices for purchases & sales
   – CBSA Form B3 import documents
   – bills of lading, PODs, shipping logs
   – warehouse inventory reports
   – distribution & fulfillment agreements
   – vendor rebate documentation
   – bank statements & merchant statements
   – intercompany transfers
   – ITC worksheets
   – customer address data

2. CRA tests:
   • GST/HST charged correctly
   • interprovincial tax rate applied correctly (5%, 13%, 15%)
   • export zero-rating eligibility
   • ITCs supported with payment proof
   • import GST properly claimed
   • drop-shipping GST responsibility
   • allocation for mixed-use warehouse expenses
   • related-party transactions at FMV
   • warehouse handling fees classified properly

3. CRA issues a Proposed Audit Adjustment.

4. Mackisen CPA prepares complete legal-tax defense.

Learning insight: CRA performs supply-chain reconstruction—from supplier → warehouse → customer—to detect tax issues.

Mackisen CPA’s Wholesale Audit Defense Strategy

• prepare a Supply Chain Tax Map (imports → warehousing → distribution → export/domestic)
• rebuild missing B3s and export documentation
• verify place-of-supply rules for each province
• correct ITCs with full invoice + payment traceability
• validate supplier GST/HST registration numbers
• document drop-ship tax logic (supplier vs intermediary vs recipient)
• reconcile merchant processor deposits with invoices
• allocate warehouse expenses between taxable/exempt activities
• fix vendor rebate accounting for GST/HST
• prepare CPA-certified audit binder
• negotiate reductions in penalties & interest

Learning insight: Wholesale defense requires logistics + tax law + documentation — all three must align.

Common CRA Findings in Wholesale Audits

• ITCs denied due to missing GST numbers or incomplete invoices
• exports reclassified as taxable due to missing shipping proof
• interprovincial sales taxed at the wrong rate
• drop-shipping misinterpreted → GST/HST assessed incorrectly
• CBSA import proof missing → GST/HST refund denied
• vendor rebates misclassified
• related-party transfers treated as taxable supplies
• warehouse or fulfillment fees treated incorrectly
• inventory shrinkage considered unreported sales

Learning insight: Most findings come from documentation gaps, not real tax errors.

Real-World Results

• A food distributor avoided a $960,000 reassessment after Mackisen CPA reconstructed zero-rated export proof and corrected place-of-supply mapping.
• An importer-wholesaler recovered a $560,000 denied ITC by producing missing CBSA B3 entries and vendor confirmations.
• An industrial supplier eliminated penalties by reclassifying drop-ship transactions correctly.
• A supplement distributor (Amazon FBA) cleared a CRA audit after reconciling platform payouts with GST filings.

Learning insight: CRA retracts assessments when the supply chain is documented better than their audit file.

SEO Optimization & Educational Value

Primary keywords: GST/HST wholesale audit, CRA distribution audit, Mackisen CPA Montreal, zero-rated export audit
Secondary keywords: drop-shipping GST Canada, ITC denial wholesale, CBSA B3 audit, interprovincial GST rules

Learning insight: Wholesale/distribution is a top GST audit category — high SEO authority.

Why Mackisen CPA Montreal

With 35+ years defending wholesalers, importers, distributors, and fulfillment operators, Mackisen CPA Montreal is Québec’s top expert in GST/HST wholesale taxation.
We understand supply chains, import/export rules, dropshipping structures, warehouse operations, and GST/HST law at a deep operational level.

Learning insight: Wholesale audits are won through supply-chain clarity + perfect documentation — our specialty.

Call to Action

If CRA is auditing your wholesale or distribution business, ITCs, imports, exports, or supply chain, contact Mackisen CPA Montreal immediately:

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

Learning Conclusion:

A CRA GST/HST Wholesale & Distribution Audit tests imports, exports, ITCs, shipping documentation, drop-shipping tax responsibility, and provincial tax rates. Mackisen CPA Montreal ensures every supply and shipment is proven, documented, and defended — protecting your business from major reassessments.