How to Manage GST/QST When Selling Your Business — A Montreal CPA Firm

Selling your business in Quebec is one of the highest-risk tax events you will ever experience. What most business owners do not realize is that a business sale automatically triggers an internal GST/QST review and risk assessment by Revenu Québec and the CRA. Before a dollar changes hands, tax authorities analyze years of your filings, trust-fund history, assets, elections, remittances, adjustments, compliance patterns, and documentation.
If anything is missing, inconsistent, misclassified, or inaccurate, the sale becomes an audit trap. Refunds are frozen. The buyer withholds payments. Revenu Québec demands corrections. The closing is delayed. In some cases, the entire transaction collapses.
As a Montreal CPA firm with more than 35 years of combined professional experience, Mackisen CPA Montréal created this intensive GST/QST compliance guide to protect you from the hidden tax dangers lurking behind every business sale.

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Why This Matters

A business sale exposes every GST/QST weakness accumulated over the years. It reveals
• inconsistent sales totals
• missing returns
• unfiled periods
• incorrect ITCs/ITRs
• past trust-fund discrepancies
• misclassified assets
• invalid elections
• wrong registration status
• incomplete documentation
• mismatched inventories and capital purchases
Revenu Québec analyzes these instantly using automated cross-matching systems.
Consequences include refund confiscation, forced reassessments, penalties and interest, renegotiation with buyers, delayed closing, loss of purchase price, legal disputes and multi-year investigations.
The sale is not “safe” simply because the contract is signed. It is safe only when GST/QST is clean.

Legal and Regulatory Framework

GST/QST rules for business sales come from the Excise Tax Act, the Quebec Sales Tax Act and the Tax Administration Act. They determine
• whether the sale is taxable
• which assets are taxable
• whether the Section 167 election eliminates tax
• whether the buyer assumes tax liabilities
• whether the seller owed trust-fund amounts
• whether past years must be corrected
A business sale can be a
• share sale
• asset sale
• going-concern sale using Section 167 election
These distinctions change the entire tax outcome.
Relevant jurisprudence makes compliance even more critical.
Hickman Motors establishes that sellers must prove election conditions.
Canderel warns that tax authorities ignore transactions that do not reflect economic reality.
Lac d’Amiante confirms reassessment when documents are incomplete.
Global Cash Access authorizes government reconstruction of transactions when records are weak.
Fortin allows personal liability when trust-fund money is incorrect.
This legal structure leaves no room for estimation or error.

GST/QST Are Trust Funds — Errors in a Business Sale Trigger Extreme Liability

GST/QST collected in your business over the years is trust money. If your business sale reveals
• missing remittances
• overstated credits
• incorrect reporting
• unremitted tax
• misclassified transactions
Revenue Québec opens a trust-fund file.
This leads to
• frozen accounts
• full-scale audits
• garnishments
• liens
• seizure of refunds
• mandatory payment agreements
• personal liability for directors
During a business sale, trust-fund errors become ten times more dangerous because the buyer, lawyers, banks, and tax authorities all review them at once.

The Mackisen High-Intensity GST/QST Compliance Checklist for Business Sales

1. Identify Transaction Type with Absolute Precision

A share sale avoids GST/QST but transfers past liabilities to the buyer. An asset sale generally triggers GST/QST unless an election prevents it.
If you misidentify the transaction type, every tax calculation in the deal becomes wrong.

2. Determine Whether the Sale Qualifies as a Going Concern

The Section 167 election eliminates GST/QST only if
• the buyer acquires everything needed to continue operations
• the buyer is registered
• the seller is registered
• the election is completed correctly
• the business is functional at transfer
A single missing component invalidates the election and creates a taxable asset sale.

3. Verify Registration Status for Both Parties Before Signing Anything

The election fails automatically if
• one party is unregistered
• numbers are incorrect
• registrations are suspended
This is one of the most common and costly errors in Quebec business sales.

4. Classify Every Asset with Audit-Proof Accuracy

You must classify
• inventory
• equipment
• furnishings
• machinery
• intellectual property
• software
• customer lists
• goodwill
• vehicles
• leasehold improvements
• real property
Each category has specific GST/QST treatment. Misclassification equals reassessment.

5. Ensure the Purchase Agreement Includes GST/QST Clauses

Every sale agreement must specify
• tax treatment
• Section 167 election
• indemnification clauses
• registration confirmation
• tax liability allocation
• asset descriptions
Agreements without tax clauses lead to litigation.

6. Complete Section 167 Election Forms with Zero Errors

The forms must be
• properly filled
• signed by both parties
• retained for six years
• produced on request
Missing or incorrect forms = full GST/QST on the entire sale.

7. Reconcile Past GST/QST Filings Before the Sale

Revenu Québec will detect
• unfiled periods
• missing returns
• unremitted trust funds
• overstated credits
• misreported assets
• inconsistent sales
These must be corrected before closing.

8. Maintain Digital Audit-Ready Documentation

For six years, you must retain
• the executed sale agreement
• all asset lists
• election forms
• trust-fund reconciliations
• GST/QST filings
• bank proofs
• inventory valuations
• goodwill calculations
• corporate resolutions
Any missing item triggers reassessment.

Recent Quebec Enforcement Trends

Revenu Québec now uses
• AI-driven asset classification review
• real-time cross-matching of GST/QST and corporate tax
• digital invoice verification
• beneficial ownership reporting
• POS and bank-deposit comparison
• instant election validation systems
Business sales with even minor inconsistencies are flagged immediately.

Benefits of Proper GST/QST Management When Selling Your Business

Correct compliance ensures
• no withheld funds
• no closing delays
• no reassessments
• no trust-fund exposure
• full support during buyer due diligence
• clean financial representation
• maximum control of negotiations
• legal and financial protection
GST/QST accuracy increases buyer confidence and protects your proceeds.

Compliance Requirements for Business Sellers

You must
• classify assets correctly
• verify registration
• reconcile trust funds
• complete elections
• maintain documentation
• correct past filing issues
• respond quickly to tax authorities
Compliance is mandatory, not optional.

Do and Don’t Based on Audit Findings

Do
• reconcile GST/QST before listing the business
• maintain all election forms
• keep digital documentation
• verify the buyer’s registration
• involve a CPA early
Don’t
• assume the sale is exempt
• rely on the lawyer alone
• misclassify intangible assets
• forget to remit trust funds
• leave GST/QST review for last minute

Common Mistakes in Business Sales

Many sellers
• fail to use Section 167
• miscalculate goodwill
• charge GST/QST when exempt
• fail to remit tax collected before closing
• do not reconcile past returns
• forget to review registration status
• do not classify assets correctly
These errors delay or destroy closings.

Winning With Revenue Québec

Mackisen provides
• GST/QST pre-sale cleanup
• Section 167 election preparation
• asset classification and valuation
• trust-fund reconciliation
• FPZ-500-V corrections
• purchase agreement tax review
• audit-ready documentation packages
With over 35 years of combined expertise, we eliminate GST/QST risk before it becomes an obstacle at closing.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montréal ensures that your business sale is structured correctly, compliant with GST/QST law, audit-ready, and fully protected from tax risk. We safeguard your proceeds, protect your legal interests, and help your transaction close smoothly and safely.