Keeping your GST/QST records audit-ready is not just a good administrative habit; it is a legal obligation for every business operating in Quebec. Revenu Québec and the CRA expect complete, organized, and easily verifiable documentation whenever they audit a GST or QST file. Businesses that fail to maintain proper records face penalties, reassessments, denied input tax credits, and even multi-year audits. This guide explains exactly how to structure, organize, and maintain your GST/QST records so your business stays compliant, avoids penalties, and remains fully prepared for an audit at any time. Well-organized GST/QST records also improve cash flow management and make year-end tax filings significantly easier for both entrepreneurs and accountants. For small and medium-sized businesses, this is one of the simplest ways to reduce audit risk.

Keeping audit-ready GST/QST records means maintaining clear traceability between your invoices, receipts, bank statements, bookkeeping entries, and GST/QST returns. Tax authorities want to see a clean trail proving what you charged, what you collected, and what you paid. Businesses that lack documentation often face adjustments because auditors cannot confirm the amounts reported. This blog provides a complete roadmap for business owners, bookkeepers, and managers who want to build strong GST/QST documentation habits and avoid costly mistakes.

LEGAL AND REGULATORY FRAMEWORK

Canadian businesses must maintain tax records under the Excise Tax Act (for GST) and the Quebec Taxation Act (for QST). These laws require businesses to keep all GST/QST documentation for at least six years from the end of the last taxation year. Records must clearly show taxable sales, exempt sales, GST/QST collected, and input tax credits or refunds claimed. Revenu Québec and CRA auditors assess whether the information in your records matches what you reported in your GST/QST returns. They expect complete invoices, contracts, supporting documents, and accurate bookkeeping entries. Failure to maintain adequate records may result in denied credits, reassessment, penalties, or interest.

Required records typically include sales invoices, purchase invoices, contracts, credit notes, bank statements, payroll records, bookkeeping ledgers, point-of-sale reports, and GST/QST return confirmations. Businesses offering both taxable and exempt supplies must also document the allocation method used to calculate recoverable input tax credits. Revenu Québec may request electronic files, POS exports, accounting software data, emails, or receipts depending on the nature of the business.

KEY COURT DECISIONS

Several court decisions highlight the importance of proper GST/QST records. In the Canderel Inc. decision, the Supreme Court of Canada confirmed the principle that tax authorities rely heavily on objective evidence and documentation. Taxpayers who cannot prove expenses or tax credits with proper records risk adjustments even if the amounts are legitimate. Quebec courts have repeatedly ruled that incomplete invoices or missing supporting documents justify denying input tax refunds. In multiple Revenu Québec cases, taxpayers lost thousands in GST/QST credits because invoices lacked supplier GST/QST numbers, client names, or detailed descriptions of services. The courts consistently support the view that documentation must meet legislative requirements, not assumptions or estimates.

These cases demonstrate that even honest businesses face penalties if their paperwork is incomplete. An auditor does not accept verbal explanations without evidence. A compliant GST/QST file requires precise records that clearly link each transaction to the amounts reported in the return.

WHY CRA AND REVENU QUÉBEC TARGET THESE ISSUES

Both the CRA and Revenu Québec conduct GST/QST audits to ensure taxpayers are collecting and remitting taxes correctly. They focus on businesses with inconsistent filings, late remittances, missing invoices, cash-based operations, or significant input tax credit claims. Industries with frequent cash transactions, subcontractors, construction, hospitality, and consultants are regularly audited. Another common trigger is claiming large refunds or credits without strong supporting documents. Auditors look for discrepancies between revenues declared on income tax returns and sales reported for GST/QST purposes.

Inadequate record keeping is one of the top reasons for reassessments. When auditors cannot trace a transaction to a real invoice or bank entry, they often assume the amount is incorrect. Businesses that maintain accurate GST/QST records reduce their audit risk and avoid unnecessary disputes. Organizing records properly also leads to faster audits with fewer interruptions.

MACKISEN STRATEGY

Mackisen CPA helps businesses set up audit-ready GST/QST systems that protect them from penalties and support their right to claim tax credits. Our strategy focuses on making sure each transaction is fully documented, categorized correctly, and supported by appropriate evidence. We help clients build a clean digital paper trail that matches bank activity, bookkeeping entries, and GST/QST filings. This includes implementing cloud-based accounting systems such as QuickBooks or Xero, reconciling accounts monthly, and setting up automated receipt management systems that store all invoices electronically. We also ensure that supplier invoices contain all legally required details, including GST/QST registration numbers.

Our firm prepares clients for audits by reviewing their documentation, identifying risks, and ensuring every claim has supporting evidence. We create GST/QST documentation binders or digital folders organized by month, tax return period, and transaction type. For high-risk industries, we perform periodic internal audits to detect issues early. Mackisen also helps correct past errors and file voluntary disclosures where necessary to avoid penalties.

REAL CLIENT EXPERIENCE

A recent client in the construction sector approached us after receiving a GST/QST audit letter. Their invoices were incomplete, several supplier receipts were missing, and their bookkeeping did not match their bank statements. Revenu Québec questioned almost $40,000 in input tax credits. Mackisen reconstructed their GST/QST file by collecting missing documents, correcting bookkeeping errors, matching receipts to payments, and obtaining compliant invoices from suppliers. We demonstrated to the auditor that the expenses were legitimate and reduced the reassessment by more than 85 percent.

Another client operating an online service business had inconsistent GST filings due to missing receipts and an unreliable bookkeeping system. We reorganized their records, updated their GST/QST returns, and implemented a monthly reconciliation process. Their audit was completed quickly with no adjustments, and their filing system is now fully compliant.

COMMON QUESTIONS

What records do I need to keep for GST/QST audits?
You must keep all sales invoices, purchase invoices, receipts, contracts, bank statements, credit notes, payroll records, section 170 documentation for mixed supplies, and bookkeeping ledgers for at least six years.

How long should I keep my GST/QST documentation?
The legal requirement is six years after the last taxation year, but businesses often keep records longer for safety.

Can my GST/QST claims be denied if my invoices are incomplete?
Yes. Revenu Québec and CRA can deny input tax credits if invoices are missing supplier details, registration numbers, descriptions, or amounts.

What happens if I lose receipts?
You may need to obtain duplicates from suppliers. Missing receipts often result in denied deductions or credits.

How do I reduce my GST/QST audit risk?
Maintain complete documentation, reconcile accounts monthly, keep detailed invoices, and ensure all GST/QST returns match your financial records.

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’re filing your first GST/QST return or optimizing multi-year refunds, our expert team ensures precision, transparency, and protection from audit risk. Our firm specializes in audit-ready GST/QST systems that keep businesses fully compliant while reducing penalties and adjustments.