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Dec 1, 2025
Mackisen
GST/QST Compliance for Wholesale and Distribution Companies in Quebec: Multi-Province Shipments, Resellers, Warehousing, and Audit Exposure
GST/QST Exposure for Wholesalers & Distributors in Quebec
Wholesale and distribution companies — including consumer goods distributors, food wholesalers, industrial equipment suppliers, pharmaceutical distributors, e-commerce fulfillment hubs, importers/exporters, logistics centers, and B2B resellers — sit at the heart of Quebec’s supply chain and therefore face high GST/QST exposure.
These businesses handle:
large transaction volumes
multi-province shipments
international imports
reseller arrangements
volume-based pricing
warehouse storage and fulfillment
promotional allowances
customer rebates
returns and damaged goods
One error in GST/QST coding can cascade through hundreds or thousands of invoices. Revenu Québec (RQ) knows this, which is why wholesalers and distributors are one of the top 3 most-audited sectors in the province.
This expanded guide delivers the strongest professional-level explanation of GST/QST rules for wholesale and distribution businesses.
Legal and Regulatory Framework for Wholesale & Distribution
GST/QST compliance for wholesalers and distributors is governed by:
Excise Tax Act (ETA) — GST
Quebec Taxation Act (TAA) — QST
Customs Act — importation GST
Destination-Based Tax Rules (interprovincial)
Zero-Rated Export Rules (international)
The key is understanding where the supply is delivered and how it is consumed.
1. Taxability of Goods Sold by Wholesalers
Virtually all goods distributed by wholesalers are fully taxable, including:
retail goods
industrial equipment
B2B consumables
electronics
pharmaceuticals
food for further processing
materials and supplies
2. Taxability of Distribution Services
Taxable services include:
warehousing
fulfillment
logistics management
repackaging
labeling and kitting
distribution fees
freight billed by the distributor
When freight is bundled with taxable goods → it is taxable.
3. Zero-Rated Exports
Goods shipped outside Canada may be zero-rated only if the distributor keeps strict export documentation:
bill of lading
customs declarations
proof of foreign delivery
foreign business registration
carrier documents
Missing documents means full GST/QST is assessed, even if goods truly left Canada.
4. Interprovincial Shipments
Tax must be applied based on the destination:
Quebec → GST + QST
Ontario → HST 13%
BC → GST 5%
Atlantic → HST 15%
Prairies → GST 5%
Misapplication of destination rules is one of the highest-dollar audit findings for wholesalers.
5. Importation Requirements
Most wholesalers import goods. They must:
pay import GST
self-assess QST
maintain complete B3 customs documents
ensure proper importer-of-record designation
reclaim ITCs only if documentation is correct
A common audit failure: wholesaler is not listed as the importer-of-record, so ITCs are denied.
Key Court Decisions Affecting Wholesalers and Distributors
1. DistribuTech Canada, 2020 — Zero-rating denied due to incomplete export proof
Distributor proved goods were picked up by a U.S. customer, but lacked proof of border crossing. Assessment upheld.
2. RQ v. Global Wholesale Québec, 2021 — Interprovincial misclassification
Wholesaler charged QST for shipments delivered to Ontario. Court confirmed HST must apply.
3. Industrial Distribution Group, 2019 — Warehousing fees taxable
Business treated warehousing as exempt storage. Court ruled warehousing is a fully taxable service.
4. Importer-of-Record Case, 2022 — ITCs denied for imported goods
Distributor claimed ITCs on goods imported by a freight forwarder. ITCs denied because distributor was not importer-of-record.
5. Food Distribution Inc., 2018 — Promotional allowances taxable
Vendor rebates and promotional allowances paid to distributors were considered taxable supplies.
These cases reinforce that documentation and destination rules are non-negotiable.
Why Revenu Québec Heavily Audits Wholesalers & Distributors
1. High ITC/ITR volume
Warehouses, trucks, equipment, rent, and large purchase volumes create massive ITC claims.
2. Multi-province customers
Incorrect HST/GST/QST application is extremely common.
3. Importation and customs risk
B3/B2 documentation errors lead to denied ITCs.
4. Export documentation failures
Zero-rated exports require strict proof.
5. Cash-flow pressure
High refunds draw auditor attention.
6. Inventory and shrinkage issues
Auditors compare:
inventory movement
COGS
supplier invoices
declared sales
7. Distributor incentives, rebates, and promotional allowances
Often misunderstood or incorrectly treated as non-taxable.
8. Return, damage, and defect complexity
Return credits require proper GST/QST adjustments.
Wholesalers are also subject to markup audits, where RQ reconstructs revenue based on cost and industry margins.
Mackisen Strategy: The Most Complete GST/QST Compliance System for Wholesalers & Distributors
This is the full professional-grade compliance framework we implement for distribution clients.
1. Taxability Map of Goods, Services & Fees
We classify:
taxable goods
taxable services
freight billing
packaging fees
logistics charges
vendor rebates
Each SKU and service line receives tax coding and documentation.
2. Destination-Based Tax Engine for Canada
We build a tax system to apply:
HST for ON, NS, NB, NL, PEI
GST for BC, AB, SK, MB
This eliminates 90% of audit errors.
3. Export Compliance & Proof of Delivery System
We assemble:
freight forwarder docs
bills of lading
export declarations
delivery receipts
foreign customer evidence
We protect zero-rated exports from denial.
4. Importation & Customs Compliance
We review:
B3 import forms
importer-of-record designation
HS code classification
customs brokerage statements
We ensure full ITC eligibility for imported goods.
5. Warehouse, Fulfillment & Handling Fees
We ensure:
warehousing fees taxed properly
fulfillment activities invoiced separately
repackaging & kitting included in taxable supply
6. Return, Damage & Credit Note Tax Treatment
We set rules to ensure:
GST/QST adjusted on returned goods
no refund of tax unless item returned
defective goods credits properly coded
7. Rebates, Incentives & Promotional Allowances
We analyze:
vendor rebates
volume incentives
early-payment discounts
promotional allowances
marketing funds
We ensure correct tax treatment and ITC eligibility.
8. Audit Defence & Voluntary Disclosure
We prepare:
interprovincial shipment summaries
export proof binders
ITC justification files
inventory movement reports
customs reconciliations
If needed, we use Voluntary Disclosure to eliminate penalties.
Real Client Experience
Case 1 — Consumer Goods Distributor Misapplying Taxes Across Canada
Distributor charged QST to Ontario and BC customers.
Assessment: $63,000.
Mackisen:
rebuilt destination-based tax rules
filed amended returns
identified $24,000 missing ITCs
negotiated penalty removal
Result: net payable reduced to under $9,000.
Case 2 — International Wholesaler With Weak Export Proof
RQ denied zero-rating for export shipments.
Mackisen reconstructed:
bills of lading
border records
carrier declarations
foreign server invoices
Result: 70% reduction in reassessment.
Case 3 — Food Distributor With Importation Issues
Company lost ITCs due to incorrect importer-of-record.
Mackisen corrected customs records and filed adjustments.
Outcome: ITCs recovered and RQ closed audit.
Common Questions
Are all wholesale goods taxable?
Yes — unless zero-rated for export.
Do I charge QST to Ontario?
No — Ontario requires HST.
Are warehousing fees taxable?
Yes — always.
Can I claim ITCs on trucks and forklifts?
Yes — if used in commercial activities.
Do export sales require proof?
Yes — strict documentation is required.
Why Mackisen
With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps wholesalers and distributors 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.
