GST/QST Rules for Digital Products and Online Services in Quebec: Software, Subscriptions, Courses, and Downloads

Introduction

As Quebec businesses shift toward digital products — software, online courses, downloadable files, subscription services, and SaaS platforms — GST/QST rules have become more complex and heavily enforced.
Digital transactions often involve automated billing, international customers, and marketplace platforms, which makes GST/QST reporting easy to get wrong.
Revenu Québec audits digital businesses frequently because they often misclassify supplies, fail to charge tax, or incorrectly treat foreign sales.
This guide explains how GST/QST applies to digital products and online services so businesses stay compliant and avoid penalties.

Legal and Regulatory Framework

Under the Excise Tax Act (GST) and Quebec Taxation Act (QSTA):

• Digital products and services supplied to Canadian customers are taxable unless explicitly zero-rated.

• The rate depends on the customer's province of residence, not the seller’s location.

• Foreign suppliers providing digital services to Quebec consumers must register under the “specified registration system.”

• SaaS services are considered taxable services.

• Downloadable products (PDFs, templates, music, videos, digital art) are generally taxable.

• Digital coaching or training delivered online is also taxable.

• GST/QST applies to subscription models and recurring billing.

Authorities enforce:

• Place-of-supply rules (ETA Part IX, QSTA equivalents)

• Digital economy provisions (2021 updates for non-residents)

• ETA s. 221/QSTA s. 22 (obligation to collect and remit)

• ETA s. 169(4)/QSTA s. 39 (documentation requirements)

Key Court Decisions

Courts have ruled that:

• Online services are considered supplied where the customer is located, not where the business operates.

• Failure to collect GST/QST on digital subscriptions results in assessments even if the business believed the platform handled taxes.

• Mixed-use digital products (e.g., online + in-person services) must be separated for correct tax treatment.

• Businesses must prove whether a customer is outside Canada to justify zero-rating.

• Automated invoices must still meet GST/QST format rules to support ITC/ITR claims.

These decisions reinforce the strict application of digital place-of-supply rules.

Why CRA and Revenu Québec Target These Issues

Digital businesses attract audits because:

• Many assume that digital products are tax-exempt.

• Platforms like Shopify or Stripe may not be set up correctly to collect GST/QST.

• Businesses cannot prove customer location for foreign sales.

• Subscription billing often miscalculates provincial rates.

• Cross-border digital services are frequently misclassified.

• Marketplace facilitator rules are misunderstood or ignored.

Certain industries face especially high risk: SaaS companies, creators, course sellers, digital consultants, educators, online fitness coaches, subscription businesses, and designers.

Mackisen Strategy

We help digital businesses implement full GST/QST compliance systems.

1. Digital Supply Classification

We analyze:

• SaaS vs digital downloads

• Licensing models

• Online training vs coaching

• Mixed digital/physical bundles

• Zero-rated vs taxable sales

2. Platform Tax Setup

We review platform settings for:

• Stripe

• Shopify

• WooCommerce

• Kajabi

• ThriveCart

• PayPal

• Squarespace

• Etsy (digital shops)

3. Customer Location Verification

We implement:

• IP address validation

• Billing address verification

• Proof of foreign residency for zero-rating

• Automated tax calculation rules

4. GST/QST Documentation & Invoicing

We ensure:

• Automated invoices meet GST/QST requirements

• Subscription models charge the correct provincial rates

• Refunds and chargebacks are properly adjusted

5. Audit Defence

If Revenu Québec reviews your digital business, we prepare:

• Full platform reports

• Customer location proofs

• Transaction verification

• Legal arguments referencing place-of-supply rules

Real Client Experience

An online course creator earned $180,000 in annual sales but failed to collect GST/QST on Quebec customers because her platform defaulted to “tax-exempt digital products.”
Revenu Québec assessed over $11,000 in GST/QST.
Mackisen corrected her platform settings, reconstructed customer data to determine place of supply, and reduced the assessment significantly by proving many customers were outside Quebec.
This case shows how tax settings can make or break compliance.

Common Questions

1. Are all digital products taxable?
Generally yes — unless explicitly zero-rated.

2. Do U.S. or international customers pay GST/QST?
No — but you must prove they are non-residents.

3. Are subscription fees taxable?
Yes, based on the customer’s province.

4. Does Shopify or Stripe automatically handle GST/QST?
Not always. Manual configuration is often required.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps digital businesses stay compliant while recovering the taxes they’re entitled to. Whether you're selling software, courses, or digital products, our expert team ensures precision, transparency, and protection from audit risk.

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GST/QST rules for digital products and online services in Quebec — learn how SaaS, subscriptions, downloads, and online courses are taxed and how to stay fully compliant.