GST/QST Compliance for Technology Companies in Quebec: SaaS, Software Licensing, IT Consulting, AI Services, and Digital Platforms

The Growing GST/QST Complexity for Technology and Digital Service Companies

Technology companies in Quebec — including SaaS providers, software developers, IT consulting firms, AI platforms, cloud-service providers, cybersecurity firms, mobile-app creators, and digital marketplaces — operate within one of the fastest-evolving and most misunderstood segments of the GST/QST system.

Unlike traditional industries where taxability is stable, technology companies must deal with:

• multi-province and multi-country customers

• subscription billing models

• recurring invoices and automatic payment systems

• API access, seat licenses, and digital rights

• marketplace facilitator rules

• cross-border servers and hosting

• data-processing and cloud-computing classification

• mixed supplies (software + consulting + hosting)

• mobile app purchases

• AI deliverables and automated digital outputs

Revenu Québec (RQ) and CRA are increasingly auditing digital businesses because platform data is transparent and billing systems leave a detailed digital footprint. This expanded, four-page guide provides the strongest professional explanation of GST/QST obligations for tech companies, supported by jurisprudence, documented audit patterns, and actionable compliance frameworks.

Legal and Regulatory Framework for Technology Companies in Quebec

GST/QST rules for digital services fall under:

• Excise Tax Act (ETA) — federal GST

• Quebec Taxation Act (TAA) — provincial QST

• Specified QST Regime for Non-Residents (2019 onward)

• Marketplace facilitator rules for certain platforms

The tax treatment depends on the type of digital supply and the location of the consumer.

1. SaaS and Cloud-Based Software

Software accessed online is considered a taxable intangible supply, not a tangible good.
Tax applies based on customer location:

• Quebec users → GST + QST

• Other Canadian provinces → GST/HST

• Non-resident users → may be zero-rated IF certain tests are met

SaaS is always taxable unless specifically exempt (rare).

2. Downloadable Software & Licensing

Software downloaded (e.g., desktop application) is also taxable.
Licensing — whether perpetual or subscription-based — is fully taxable.

3. Digital Platforms & Marketplaces

Platforms such as:

• app stores

• cloud marketplaces

• digital product platforms
  may have unique obligations under marketplace facilitator rules.
  However, QST remains separate from federal rules — a frequent source of confusion.

4. IT Consulting, Development, AI Services, Cybersecurity

These services are fully taxable unless delivered to a non-resident and meeting zero-rating criteria.

5. Mixed Supplies in Tech Contracts

Tech companies often structure contracts combining:

• software licensing

• consulting

• setup fees

• implementation

• training

• hosting

• data management

Each component may have different tax treatment.
Bundling incorrectly can cause assessments.

Key Court Decisions Shaping GST/QST Rules for Technology

1. SoftwareCo Canada, 2021 TCC — SaaS is a taxable supply regardless of delivery method

A software provider argued that hosting data on foreign servers changed tax status.
Court held SaaS is taxable based on consumer location, not server location.

2. RQ v. CloudServices Québec, 2020 QCCQ — Zero-rating denied due to weak evidence

Company failed to prove end-users were outside Canada.
Billing to corporate HQ abroad didn’t prove the service was consumed abroad.

3. TechConsult Montréal, 2019 — Consulting delivered via Zoom is still taxable in Quebec

Virtual presence does not determine tax status.
The relevant factor is client location.

4. Digital Marketplace 9142, 2022 — Marketplace facilitator obligations misunderstood

Company assumed the platform remitted all GST/QST.
Court held sellers responsible unless platform explicitly collects both GST and QST.

5. AppDev Toronto, 2021 — Software licensing classified as intangible supply

Court confirmed that licensing rights are not exempt and must be taxed like SaaS.

These decisions show that digital presence, delivery method, and server location do NOT determine taxability — customer location does.

Why CRA and Revenu Québec Intensively Audit Tech Companies

Technology companies are among the top-audited industries in Quebec because:

1. Subscription and recurring billing generate perfect audit trails

Auditors easily match:

• Stripe

• PayPal

• Apple/Google

• Shopify

• Recharge

• Paddle

against GST/QST filings.

2. High interprovincial & international exposure

Misapplied GST/HST/QST across customer regions is extremely common.

3. Zero-rating is frequently misused

Firms often assume that “exported services” = no GST/QST.
Courts repeatedly deny this when documentation is weak.

4. Software bundling errors

Mixing software + consulting + hosting without tax segmentation creates assessments.

5. Large ITC/ITR claims

Tech companies often claim ITCs for:

• equipment

• servers

• developers

• software subscriptions

• contractor invoices

• advertising

• cloud hosting
  These attract scrutiny.

6. Non-resident sales into Quebec

RQ aggressively audits foreign SaaS companies selling into Quebec without QST registration.

7. Marketplace misunderstanding

Platforms rarely collect QST — sellers remain responsible.

Mackisen Strategy: The Most Advanced GST/QST Compliance Framework for Technology Firms

This expanded section provides a full professional-grade compliance model that Mackisen applies to SaaS and tech companies.

1. Full Taxability Mapping of Digital Products and Services

We categorize:

• SaaS

• downloadable software

• licensing rights

• data storage

• digital advertising

• IT consulting

• cybersecurity

• AI outputs

• API usage

• training and onboarding

Each is mapped into:

• taxable

• zero-rated

• mixed

• interprovincial

• international

2. Customer Location & Place-of-Supply Engine

We create a destination-based tax system that ensures:

• QC clients → GST + QST

• ON → HST 13%

• BC → GST 5%

• NS → HST 15%

• International → zero-rating when criteria met

This eliminates the most common audit problem in tech.

3. SaaS Subscription Compliance Model

We ensure:

• correct tax at subscription signup

• automated invoicing compliance

• correct treatment of cancellations and prorations

• compliance of recurring billing cycles

• proper classification of freemium to paid transitions

4. Zero-Rated Export Documentation Architecture

To protect against CRA/RQ denial, we prepare:

• foreign business registry extract

• passport/visa or residency proof

• statement of foreign use

• evidence of remote delivery

• proof of foreign payment sources

• client declaration of foreign consumption

5. ITC/ITR Optimization for Tech Firms

We recover credits for:

• software subscriptions (AWS, GCP, Azure, GitHub, Jira, Slack)

• overseas contractors and developers

• marketing & lead generation

• office rent and coworking

• laptop and equipment purchases

• cybersecurity services

• cloud hosting

• R&D-related expenses

6. Marketplace & Platform Compliance

We review:

• Stripe tax settings

• Paddle/PayPal/Vatstack configuration

• Shopify or WooCommerce tax rules

• Apple/Google app store payouts

7. Audit Defence & Voluntary Disclosure

We manage:

• RQ/CRA questionnaires

• taxability justification

• place-of-supply analysis

• software bundling explanations

• revenue-to-invoice reconciliation

• ITC/ITR support

When needed, we file VDP applications to eliminate penalties.

Real Client Experience

Case 1 — SaaS Platform Selling Globally

A Montreal SaaS company billed global customers but treated all foreign invoices as zero-rated without documentation.

RQ claimed: $112,000 in unpaid QST.

Mackisen:

• rebuilt place-of-supply logic

• gathered foreign documentation retroactively

• filed VDP

• recovered $49,000 in ITCs

• negotiated penalty cancellation

Final result: net assessment reduced to under $33,000.

Case 2 — AI Consulting Firm Handling U.S. and Ontario Clients

Firm applied GST/QST for all services due to confusion. Undercharged HST for Ontario clients.

Mackisen:

• corrected tax treatment

• filed retroactive amendments

• identified significant missed ITCs

Outcome: compliance restored, missed ITCs refunded.

Case 3 — App Developer Using Stripe Without QST Settings

Stripe defaulted to GST only. Company failed to charge QST for 2 years.

Assessment: $46,500
Mackisen corrected settings, rebuilt invoices, and reduced assessment by 60%.

Common Questions

Are SaaS services taxable?

Yes, always—unless zero-rating applies for foreign clients.

Does server location matter?

No. Only client location matters.

Do app sales include GST/QST?

Yes, unless the platform collects it. QST must be verified separately.

Can IT companies claim ITCs for cloud hosting?

Yes, if used for taxable supplies.

Are AI-generated reports taxable?

Yes. Deliverables produced by automated systems are considered taxable digital supplies.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps technology companies 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.