Accounting for GST/QST on export sales is one of the most misunderstood areas of sales tax compliance for Quebec businesses. Many companies assume that exports are simply tax-free, but in reality, they fall under a specific category called zero-rated supplies. Zero-rated supplies are taxable transactions at a rate of zero percent, meaning you do not charge GST or QST to the foreign customer, but you remain entitled to claim the full input tax credits on business expenses related to those sales. To benefit from the zero-rated rules, however, you must maintain proper documentation proving that the goods or services were indeed exported or consumed outside Canada. Without proper proof, Revenu Québec and the CRA may deny credits or reassess your GST/QST return.

Understanding how to account for GST/QST on export sales is essential for any business selling goods to international customers, providing services to clients outside Canada, or operating an e-commerce store with global distribution. Zero-rated rules apply differently depending on whether you export goods, digital products, software, consulting services, or intellectual property. This guide explains how to classify export transactions, how to handle GST/QST on zero-rated supplies, and how to remain fully compliant with Revenu Québec and the CRA.

LEGAL AND REGULATORY FRAMEWORK

Exports are governed by the Excise Tax Act for GST and the Quebec Taxation Act for QST. Under these laws, most exports of goods and certain services to customers outside Canada are considered zero-rated supplies. This means that the business charges GST and QST at a rate of zero percent, while retaining the right to claim input tax credits and input tax refunds for expenses related to these sales. To classify a transaction as zero-rated, the business must demonstrate that the goods left Canada or that the services were supplied to a non-resident and consumed outside Canada.

Documentation requirements include shipping records, export declarations, courier tracking, proof of payment from a foreign customer, contracts, invoices showing the foreign address, and evidence that the buyer is a non-resident. When services are supplied, the business must show that the benefit of the service was primarily received outside Canada. Without adequate documentation, Revenu Québec may classify the transaction as a taxable sale in Quebec and require GST/QST to be remitted.

KEY COURT DECISIONS

Courts across Canada have upheld that the burden of proof rests entirely on the taxpayer when claiming zero-rated export treatment. In several cases involving exporters, the CRA and Revenu Québec denied input tax credits due to missing export documentation, even though the taxpayer argued that the goods were shipped abroad. Courts have consistently ruled that invoices alone are insufficient; exporters must show physical evidence of shipment, tracking results, and proof of export.

In cases involving services, courts examined whether the services provided benefited residents or non-residents. If any meaningful portion of the service was consumed in Canada, courts have ruled that the transaction may not qualify as zero-rated. These decisions reinforce that documentation and proper classification are critical for GST/QST compliance on export sales.

WHY CRA AND REVENU QUÉBEC TARGET THESE ISSUES

Export sales are a risk area for tax authorities because they involve cross-border operations, complex documentation, and potential misclassification. Many businesses incorrectly label transactions as exports, even when the goods are shipped to a Canadian address or when services partially benefit Canadian residents. This creates lost tax revenue and often leads to reassessments.

Revenu Québec and the CRA frequently audit export-heavy businesses, especially those with large input tax credit claims. They review export documents, scrutinize shipping records, and compare sales patterns with reported zero-rated supplies. Businesses that lack strong documentation or operate in industries such as wholesale distribution, e-commerce, international consulting, logistics, and digital services often become audit targets. Because export sales reduce GST/QST payable, the authorities focus on confirming that these sales genuinely qualify.

MACKISEN STRATEGY

Mackisen CPA helps businesses classify and document export sales correctly to ensure full compliance with GST/QST rules. Our strategy begins by reviewing your customer base, shipping processes, invoicing system, and digital service delivery to determine which transactions qualify as zero-rated. We verify that invoices include foreign addresses, that tracking numbers confirm exports, and that contracts clearly show the location where services are consumed. We also create standardized documentation packages to ensure every export sale meets audit requirements.

We help clients structure their accounting systems to record export sales separately from domestic taxable sales. This simplifies GST/QST reporting and reduces the risk of errors on FPZ-500-V returns. Mackisen also performs GST/QST compliance reviews for businesses filing large zero-rated claims to ensure that input tax credits are defensible. When documentation is missing, we help reconstruct export evidence or prepare voluntary corrections to avoid penalties.

REAL CLIENT EXPERIENCE

A Montreal manufacturer exported equipment to clients across Europe and the United States but did not maintain complete courier records. Revenu Québec questioned more than two hundred thousand dollars in input tax credits related to zero-rated sales. Mackisen contacted courier companies, retrieved export documentation, matched each shipment to an invoice, and assembled a complete compliance package. The audit closed with no reassessment.

An e-commerce company sold goods worldwide but mistakenly applied zero-rated treatment to sales that were delivered to freight forwarders inside Canada. Revenu Québec reassessed them for uncollected GST/QST. Mackisen reviewed their shipping workflow, corrected their classification, updated their checkout system to differentiate domestic and export orders, and helped file adjusted GST/QST returns.

A consulting firm based in Quebec provided strategic services to a US corporation. Revenu Québec initially disputed the zero-rated classification. Mackisen demonstrated that the service was consumed entirely outside Canada and provided supporting contracts and emails. The reassessment was reversed.

COMMON QUESTIONS

Are all exports zero-rated supplies
Most goods exported outside Canada qualify, but services must meet stricter rules about consumption outside Canada.

Do I need proof that the customer is outside Canada
Yes. You must show foreign billing and shipping addresses, along with other supporting documents.

What documents are required to support zero-rated export sales
Invoices, shipping records, export declarations, contracts, proof of payment from a foreign customer, and courier tracking.

How do I report export sales on the GST/QST return
Zero-rated sales must be reported in the appropriate line for taxable supplies at zero percent.

Can Revenu Québec deny input tax credits for exports
Yes. If documentation is missing or incomplete, credits may be denied even if the sale was legitimate.

WHY MACKISEN

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses stay compliant while recovering the taxes they’re entitled to. Whether you export goods, digital products, or international services, our expert team ensures precision, transparency, and strong export documentation that withstands audit scrutiny. We guide businesses through zero-rated classifications, GST/QST filings, and international compliance challenges.