Taxable supplies

The default category

The CRA says most property and services supplied in or imported into Canada are subject to GST/HST, so taxable is the default and exempt or zero-rated is the exception. Its examples of taxable supplies include accounting and legal services, barber and hairstylist services, hotel accommodation, clothing and footwear, car repairs, advertising in most cases, and sales and rentals of commercial real property.

The rate depends on the place of supply. As the CRA’s own example shows, a sale delivered to a customer in Toronto is charged 13% HST. A sale delivered to a province with a different rate, or taxed at 0%, is handled differently, so the customer’s location and the nature of the supply both matter.

Why the label drives three decisions

First, taxable supplies are what you charge and collect tax on. Second, they generally allow input tax credits on related purchases. Third, they feed the small-supplier test: for most businesses, total worldwide revenue from taxable supplies, including zero-rated ones, above $30,000 within a single calendar quarter or across four consecutive quarters ends small-supplier status. Financial services, capital property sales and goodwill are left out of that count.

This means a business selling mostly zero-rated items can still be required to register, even though it never collects tax from customers.

A quick illustration

An Ontario accounting practice invoices $2,000 for services to an Ontario client. The CRA lists accounting services as taxable, so a 13% HST charge of $260 is added and the client is billed $2,260. The $260 is collected for the CRA rather than earned as revenue, and it is reported on the GST/HST return. These figures are illustrative only; the status of a particular service depends on its facts, so check the supply rather than relying on a similar-sounding example.

What to discuss with your accountant

Ask how each revenue line is classified, whether you are above the small-supplier limit, and whether any line is zero-rated or exempt. Review the tax codes in your accounting software against that classification. Related pages cover zero-rated supplies, exempt supplies and the input tax credit.