Surviving a GST/HST Audit

Introduction
Surviving a GST/HST audit is something every business owner must be prepared for—whether you run a corporation, work as a freelancer, operate an e-commerce shop, manage rental units, or provide professional services. GST/HST and QST are government trust funds, which makes them one of the most heavily audited tax areas in Canada. CRA and Revenu Québec use advanced analytics, AI-driven cross-matching and industry benchmarks to flag businesses for GST/HST review. A GST/HST audit can be stressful, time-consuming and expensive if documentation is missing or errors have accumulated. This guide provides a complete roadmap for surviving a GST/HST audit, minimizing penalties and protecting your business from long-term exposure.

Legal and Regulatory Framework
Surviving a GST/HST audit begins with understanding CRA’s legal authority. Under the Excise Tax Act and Québec’s Tax Administration Act, auditors may:

• request books and records
• demand supporting documents for ITCs/ITRs
• access invoices, receipts, contracts and bank statements
• inspect business premises
• interview employees
• analyze POS systems and online platform data
• compare GST/HST filings with income tax returns

Businesses must retain documentation for six years and provide it upon request. Failing to comply may result in estimated assessments or penalties. Revenu Québec applies even stricter documentation standards for QST audits.

Key Court Decisions
Courts have repeatedly upheld CRA and Revenu Québec audit powers in GST/HST cases. Key rulings include:

• invoices must include required details—otherwise ITCs can be denied even if the expense was real
• CRA does not need a warrant to review business records
• taxpayers bear the burden of proof during audits
• estimates by CRA are valid when businesses fail to provide evidence
• mixed personal and business expenses are disallowed without documentation
• ITCs claimed without proper supplier information are invalid

Québec courts reinforce these rules and apply strict penalties for QST errors.

Why CRA and Revenu Québec Audit GST/HST Returns
Understanding why audits happen is key to surviving a GST/HST audit. Audit triggers include:

• large ITC claims
• new businesses with high refund requests
• rapid increase in revenue
• mismatches between GST/HST filings and income tax returns
• missing GST or QST numbers on invoices
• home-based businesses with high vehicle or meal claims
• cash-based industries
• e-commerce revenue spikes
• non-filers or repeated late filings
• assignment sales or real estate flips
• suspected unreported revenue
• incorrect place-of-supply tax rates

Knowing these triggers helps prepare for the audit long before CRA contacts you.

Mackisen Strategy (How We Prepare Clients)
Mackisen CPA uses a complete, structured approach for surviving a GST/HST audit:

1. Full Pre-Audit Review

We start by re-examining all GST/HST and QST filings to identify errors before CRA does.

2. Documentation Reconstruction

We gather:

• invoices
• receipts
• contracts
• bank statements
• mileage logs
• POS reports
• Shopify/Stripe/Amazon dashboards
• export documents
• e-commerce marketplace summaries

We fix missing documentation and build a defensible audit file.

3. ITC/ITR Verification

We verify that:

• supplier names and tax numbers are valid
• tax charged matches tax remitted
• commercial activity supports ITC eligibility
• duplicate claims are removed
• personal expenses are filtered out

4. GST/HST and QST Reconciliation

We ensure:

• collected tax matches remitted amounts
• place-of-supply rules are applied correctly
• QST filings align with GST filings
• interprovincial sales are classified correctly

5. Direct Representation

We manage 100% of communication with CRA or Revenu Québec so clients don’t say anything that harms their case.

6. Audit Defense & Negotiation

If adjustments are proposed, Mackisen negotiates:

• reduced penalties
• corrected assessments
• fair outcomes
• interest relief where applicable
• voluntary disclosure if needed

This strategy is key to surviving a GST/HST audit successfully.

Real Client Experience
Many clients come to Mackisen after receiving audit letters or facing reassessments:

• A construction company was audited for five years of GST. CRA suspected hidden revenue. Mackisen reconstructed records, justified ITCs and reduced the assessment by 80%.
• An e-commerce seller’s Shopify data did not match GST filings. We reconciled all platform reports and corrected errors before CRA escalated the audit.
• A Québec consultant claimed ITCs on personal expenses. Revenu Québec denied them. Mackisen refiled properly and structured correct expense tracking.
• A real estate assignment seller failed to charge GST/HST. CRA reassessed tens of thousands. We negotiated fairness relief and fixed future filings.

These cases show why expert guidance is essential for surviving a GST/HST audit.

Common Questions
Clients frequently ask:

• What documents will CRA ask for?
Invoices, receipts, contracts, bank statements, mileage logs, sales records, GST summaries, POS reports.

• Will CRA audit multiple years?
Usually 3–4 years—more if fraud or misrepresentation is suspected.

• Do I need to meet the auditor?
No—Mackisen handles all communication.

• What happens if I can’t find receipts?
We reconstruct documentation using bank statements, supplier records and affidavits.

• Can CRA freeze my account?
Yes—if taxes are not remitted or audits uncover trust-fund non-compliance.

• Is QST audited separately?
Yes—Revenu Québec conducts its own audits.

These answers help prepare clients for surviving a GST/HST audit.

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 undergoing a full CRA audit, our expert team ensures precision, transparency and protection from government enforcement. When surviving a GST/HST audit, Mackisen provides complete audit defense, documentation support, reconciliation analysis and long-term compliance strategies.