Do I Charge GST/HST on Services? – A Complete Guide by a Montreal CPA Firm Near You

Introduction

One of the most confusing questions for freelancers, consultants, contractors, and service-based businesses in Canada is: Do I charge GST/HST on my services—and which rate applies?
Canada’s service taxation rules are complex because services are taxed based on the client’s province, not where the service provider lives or operates. This means a consultant living in Alberta (5% GST province) may need to charge 15% HST to a client in Nova Scotia. Many businesses unknowingly charge the wrong rate, fail to charge any tax when required, or charge GST when the service is exempt. These mistakes frequently lead to CRA reassessments, denied ITCs, and penalties. This guide explains exactly when GST/HST applies to services, how place-of-supply rules work, which services are exempt, and how to stay compliant regardless of where your clients are located.

Legal and Regulatory Framework

GST/HST on services is governed by the Excise Tax Act, including:
• place-of-supply rules (Regulations 7 to 16)
• definition of taxable supplies
• exemptions under Schedule V
• zero-rated services under Schedule VI
• GST/HST registration obligations (small supplier threshold of $30,000)

Key principles:

1. Most Services Are Taxable

Unless specifically exempt, services provided in Canada are subject to GST or HST.

Taxable services include:
• consulting
• coaching
• IT work
• design services
• marketing services
• trades and contracting
• professional services
• digital and remote services delivered electronically

2. Place-of-Supply Rules for Services

GST/HST depends on the client’s province, not the business’s location.

Examples:
• Client in Ontario → charge 13% HST
• Client in Nova Scotia → charge 15% HST
• Client in Alberta → charge 5% GST
• Client in Québec → charge 5% GST + 9.975% QST (if registered for QST)

3. Services to Foreign Clients

Services provided to clients outside Canada are generally zero-rated (0%) if certain conditions are met.

4. Exempt Services

Some services are exempt from GST/HST, including:
• most health services
• child care
• financial services
• music or sports lessons (certain categories)
• educational services meeting prescribed rules

Exempt services do not charge GST/HST, and ITCs cannot be claimed on related expenses.

These rules define how GST/HST applies to services in Canada.

Key Court Decisions

Several important cases shape how GST/HST applies to services.

In Air Canada v. Canada, the Supreme Court confirmed that GST/HST is a strict liability tax—businesses owe tax whether or not they charged it correctly.

In Global Cash Access v. Canada, the court reinforced that the nature and location of the service determine GST/HST, not corporate convenience.

In Movies Plus Ltd. v. Canada, CRA successfully reassessed a business applying the wrong place-of-supply rules.

In Revenu Québec v. HomeAway, courts affirmed that remote digital services must charge provincial taxes even without physical presence.

These decisions confirm that businesses must follow GST/HST rules precisely, especially for cross-province and cross-border clients.

Why CRA Targets This Issue

CRA heavily audits service-based businesses because errors are extremely common. CRA flags:
• wrong GST/HST rates applied for out-of-province clients
• businesses operating in Québec not registering for QST
• service providers charging GST only when HST is required
• exempt services misclassified as taxable or vice versa
• digital service providers misunderstanding remote client rules
• freelancers exceeding $30,000 without registering
• service invoices missing GST/HST numbers
• services supplied to foreign clients incorrectly zero-rated

CRA also cross-checks:
• bank deposits
• Stripe/PayPal payouts
• T4A platform slips
• contracts and invoicing
• place-of-supply inconsistencies in GST returns

Service providers are one of the top GST/HST audit targets in Canada.

Mackisen Strategy

At Mackisen CPA Montreal, we help service-based businesses apply the correct GST/HST rates and maintain full compliance. Our structured service taxation system includes:

• reviewing all services to determine if they are taxable, exempt, or zero-rated
• building a province-by-province GST/HST matrix for your client base
• applying place-of-supply rules correctly for remote, digital, and interprovincial services
• registering you for GST/HST (and QST if needed)
• integrating GST/HST rules into your invoicing and bookkeeping systems
• coordinating GST/HST with digital platform settings (Shopify, Stripe, QuickBooks, etc.)
• preparing accurate GST/HST returns
• correcting past errors through CRA’s Voluntary Disclosure Program if necessary
• preparing audit-ready documentation for CRA inquiries

This approach ensures accuracy, compliance, and tax efficiency.

Real Client Experience

A Toronto consultant charged 5% GST to Nova Scotia and Ontario clients. CRA reassessed her thousands in uncollected HST. We corrected filings and implemented a province-based tax matrix.

A Montréal health practitioner charged GST/HST on exempt services. We corrected her classification, refunded clients appropriately, and prevented CRA penalties.

A digital coach selling services to foreign clients charged GST unnecessarily. We helped classify those services as zero-rated, increasing her margins.

A BC contractor performed work remotely for Ontario clients but charged GST instead of HST. CRA corrected the filings. We installed proper place-of-supply templates.

Common Questions

Business owners often ask whether the tax rate follows where the work is performed. No—it follows where the customer is located.

Others ask whether GST/HST applies to U.S. clients. Usually no—services to foreign clients are zero-rated.

Some ask whether coaching or consulting is exempt. No—these are taxable services.

Another question: Do I need to charge QST if my client is in Québec? Yes—if you are required to register for QST.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps service-based businesses across Canada charge and remit GST/HST correctly. Whether you operate locally, nationally, or globally, our expert team ensures precision, compliance, and complete CRA protection.