CRA Place of Supply Rules: What Tax to Charge Out-of-Province Clients
Once you register for a GST/HST number, billing local clients is simple: you charge the sales tax rate of your home province. But what happens when an Ontario freelancer bills a client in British Columbia, Alberta, or the United States? To stay compliant, Canadian sole proprietors must master the CRA Place of Supply rules.
The Golden Rule
For professional services, the sales tax rate is determined by the physical billing address of your client (the recipient), not your location. Your home province's tax rate does not follow your invoices across provincial borders.
1. Charging Sales Tax by Province
If you are registered for GST/HST and perform services for a client in another Canadian province, you must apply the sales tax rate of the recipient's province. Let's break down what to charge based on your client's billing address:
| Client Province | Tax Type | Rate to Charge |
|---|---|---|
| AB, NT, NU, YT | GST Only | 5% |
| BC, MB, SK | GST on custom services (PST may apply to goods or software) | 5% |
| Quebec (QC) | GST, plus QST if you are QST-registered | 5% + 9.975% |
| Ontario (ON) | HST | 13% |
| Nova Scotia (NS) | HST | 14% |
| NB, NL, PE | HST | 15% |
For example, if you are an Ontario freelancer (13% HST) billing a client in Calgary, Alberta, you charge only 5% GST on their invoice. If you are a BC freelancer (5% GST) billing a client in Toronto, Ontario, you must charge 13% HST.
2. US and International Clients: The Zero-Rated Rule
If you provide creative, technical, or consulting services to clients outside of Canada (such as a US startup or a UK agency), your services are classified as zero-rated exports (taxed at 0%).
- No Sales Tax: You do not add GST, HST, or foreign sales tax to their invoices. It is good practice to annotate the invoice with a line such as “Zero-rated export — 0% GST/HST” so the tax treatment is clear if CRA reviews your records.
- ITCs still apply: Even though you charge 0% tax, zero-rated sales are still considered taxable supplies. This means you can claim your business expenses (software, home office, hardware, etc.) as Input Tax Credits (ITCs) to recover the GST/HST you paid.
How to report on your GST/HST return
On CRA's current electronic return, zero-rated export revenue is reported on Line 91 (the line for exempt supplies and zero-rated exports), not on Line 101 which is an older field name. Your taxable sales made in Canada, including any zero-rated domestic supplies, go on Line 90. If you mix domestic and export revenue, you will have amounts on both lines.
Nuance: zero-rating conditions
Most remote professional services to non-resident business clients qualify as zero-rated under the ETA. However, there are exceptions — for example, services physically performed in Canada, or certain services connected to Canadian real property. If your engagement is complex or involves work done on-site in Canada, confirm the classification with an accountant before invoicing.
3. What About Provincial PST (BC, SK, MB, QC)?
Sole proprietors are often terrified that they will have to register for provincial sales taxes (like BC PST, SK PST, MB RST, or QC QST) when billing out-of-province clients.
Fortunately, if you sell custom professional services (such as custom software development, custom graphic design, marketing consulting, or copywriting), provincial sales taxes generally do not apply. You are usually only required to collect the federal GST portion (5%), though Quebec QST can still apply if you are QST-registered.
The SaaS Exception
If your business sells pre-packaged software, digital downloads, or SaaS (Software-as-a-Service) subscriptions rather than custom services, provinces like BC, SK, and QC have specific digital tax rules. You may be required to register for their provincial PST/QST once your sales to their residents exceed $10,000.
4. Audits: The Importance of a Billing Address
If the CRA reviews your sales tax filings, they will want to see why you charged 5% GST to a client instead of your home province's 13% or 15% HST.
To satisfy an auditor, you should include the recipient's physical business address directly on the invoice. Listing a US or out-of-province name without their physical location gives the CRA room to deny the place-of-supply classification and retroactively charge you the difference out of your own pocket.
Automated Invoicing with NorthOS
You shouldn't have to memorize tax tables to send an invoice. When you enter a client's address into NorthOS, our invoicing system automatically applies the correct CRA Place of Supply rules, calculating the exact GST or HST rate for you in a fraction of a second.
Disclaimer: This guide is for informational purposes only. Place-of-supply classifications can depend on specific contract terms. Confirm your invoicing tax structures with the CRA T4002 or a certified tax accountant.