Place of supply rules, set out in Schedule IX of the Excise Tax Act, determine which province's GST/HST rate applies to a sale. For goods, it is generally the delivery destination. For services, it is generally the recipient's address obtained by the supplier. Getting the province wrong means charging the wrong rate, which can trigger a CRA assessment.
That sounds simple until you start invoicing. A Toronto consulting firm with clients in Alberta, Nova Scotia, and Quebec cannot just add 13 percent to every invoice and move on. The place of supply is a legal determination made under the Excise Tax Act, RSC 1985, c E-15, and it turns on where the supply is considered to occur, not on where your office happens to be. If your business ships goods, delivers services remotely, or licenses digital property to customers outside Ontario, the place of supply rules decide what you collect and what you remit.
This article covers the general rules for goods, services, and intangible personal property, walks through the address hierarchy that governs most professional services, and flags the errors that surface most often on audit. It assumes you are already registered for GST/HST. If you are still working out whether registration is required at all, that is a separate question covered in our guide on whether to register for GST/HST as a sole proprietor or corporation.
Why the Place of Supply Rules Are Not Just a Technicality
Canada does not have one sales tax rate. It has several, and which one you charge depends entirely on the place of supply.
In the participating provinces, the federal GST is blended with a provincial component into a single harmonized sales tax. Ontario applies HST at 13 percent. New Brunswick, Newfoundland and Labrador, and Prince Edward Island apply 15 percent. Nova Scotia moved to 14 percent effective April 1, 2025. In the non-participating provinces and the territories, including Alberta, British Columbia, Saskatchewan, Manitoba, Quebec, and the three territories, only the 5 percent GST applies federally, with any separate provincial sales tax administered on its own track. The Canada Revenue Agency publishes the current table on its charge and collect the tax page.
The registrant's collection obligation under Part IX of the Excise Tax Act runs on the place of supply, not on the supplier's address. Section 165 imposes tax on a taxable supply made in Canada, and imposes the additional provincial component where the supply is made in a participating province. Schedule IX is what tells you whether a supply was made in a given province in the first place.
The consequences of getting it wrong run in both directions. If you charge the lower rate when a higher-rate province governs, the CRA can assess your business for the shortfall, plus interest, whether or not you can go back and collect it from the client. Recovering an undercharge from a customer a year later is a conversation most business owners would rather not have. If you overcharge, you have collected tax the client did not owe, which creates a credit or refund obligation and an awkward file if the client's own accountant catches it first.
None of this is the same question as whether you must register. Registration thresholds turn on worldwide taxable revenues. Place of supply turns on the transaction. A business can be perfectly correct on registration and still be assessed on years of mis-rated invoices.
The General Rule for Goods
For tangible goods, the place of supply is where the goods are delivered or made available to the recipient. The supplier's location does not control.
Two practical situations cover most sales:
- Shipped goods. Where the supplier sends the goods by mail, courier, or common carrier, the place of supply is the destination specified in the contract of carriage. A Mississauga manufacturer shipping to a customer in Halifax is making a supply in Nova Scotia. It charges the Nova Scotia rate, even though the goods never left the province until the truck pulled out.
- In-person delivery. Where the customer takes physical possession at the supplier's premises, the place of supply is the province where that transfer happens. The same Mississauga manufacturer selling over the counter to a customer who drove in from Calgary is making a supply in Ontario. It charges 13 percent HST, because the goods were made available in Ontario.
The distinction that trips people up is between where the goods end up and where the customer is based. A customer's head office in Vancouver does not make the supply a British Columbia supply if the goods are shipped to a job site in Saint John.
Multi-party arrangements sit outside this general framework. Where an unregistered non-resident sells goods that are physically held or manufactured in Canada by a third party, the drop shipment rules in section 179 change who is treated as supplying what to whom. The CRA sets out how in Memorandum 3-3-1, Drop Shipments. If your business acts as a delivery agent or fulfils orders on behalf of a non-resident vendor, that is a specialist analysis. The general delivery rule above will not give you the right answer on its own.
The GST/HST Place of Supply Rules for Services: The Address Hierarchy
Most Ontario businesses reading this sell services rather than goods, and this is where the analysis gets genuinely counterintuitive.
The general rule for services is a cascading four-step test, described in CRA Memorandum 3-3-6, Place of Supply in a Province, General Rules for Services. You work down the steps in order and stop at the first one that gives an answer.
Step one: one Canadian address obtained. If, in the ordinary course of its business, the supplier obtains a single Canadian address of the recipient, the supply is made in the province of that address. For most engagements this is the end of the analysis.
Step two: more than one Canadian address obtained. If the supplier obtains two or more Canadian addresses of the recipient, the supply is made in the province of the address most closely connected with the supply.
Step three: no Canadian address obtained. If no Canadian address of the recipient is obtained, the supply is made in the province where the greatest proportion of the service is performed. Where the service is performed equally in two or more participating provinces, the province with the highest provincial rate governs.
Step four: substantially performed outside the participating provinces. If the service is performed 50 percent or more outside the participating provinces, the supply is not made in a participating province, and GST alone applies rather than HST.
The point most business owners miss is buried in step one. For ordinary professional and consulting services, the recipient's address controls, not the place where the work is physically done. A Toronto lawyer, accountant, bookkeeper, marketing consultant, or software developer can do every hour of the work at a desk in Ontario. If the client's address obtained in the ordinary course of business is an Alberta address, the supply is still made in Alberta. Remote delivery does not change the answer. Neither does the fact that the file was opened, worked, and closed without anyone leaving the province.
A Worked Example
A Toronto consultant is retained by a company whose head office is in Calgary. The engagement letter is addressed to the Calgary head office. The work itself supports a project site in Halifax, and the consultant has the Halifax project address on file from correspondence.
Two Canadian addresses have been obtained, so step one does not resolve it and we move to step two: which address is most closely connected with the supply? If the contract was negotiated with and signed by the Calgary head office, invoices go to Calgary, and the deliverable is a report to Calgary management, the Calgary address is the one most closely connected with the supply. The consultant charges 5 percent GST.
Change the facts. If the retainer is with the Halifax operation, instructions come from Halifax, the deliverable serves the Halifax site, and Calgary appears only as a corporate letterhead, the Halifax address is more closely connected. The consultant charges 14 percent HST.
The facts drive the answer, which is exactly why the documentation matters. On audit, a file that shows which address the engagement actually ran through is worth considerably more than a recollection.
Exceptions to the General Services Rule
Before applying the address hierarchy, confirm that the service is not in one of the carved-out categories. Specific rules override the general rule, and several common service types have their own.
Personal services. Services performed on or to an individual, where the individual is present at the time, follow the location of the individual rather than a billing address.
Services in relation to real property. These follow the province where the real property is located. A property manager, a building consultant, or a lawyer advising on a specific parcel is generally looking at the property's province, not the client's.
Services in relation to tangible personal property. These generally follow where the property is situated when the service is performed, with rules for property that moves between provinces during the engagement.
Telecommunication services. These have their own rule keyed to the physical location of the equipment and the billing arrangements.
The CRA sets out these categories in Memorandum 3-3-6-1, Personal Services, Services in Relation to Property and Telecommunication Services.
Beyond those categories, the CRA has published guidance on specific arrangements that displace the general rule. Policy Statement P-219, Place of Supply (HST) for National Equipment Maintenance Contracts, for example, addresses contracts under which equipment across several provinces is serviced under one national agreement. These determinations are fact-specific, and a business operating under a single national contract should not assume the billing address answer applies.
The practical takeaway is a sequencing point: check for a specific rule first, then fall back to the general rule.
Place of Supply for Intangible Personal Property
Intangible personal property, or IPP, covers software licences, digital subscriptions, memberships, franchise rights, and intellectual property rights. It has its own general rule, set out in CRA Memorandum 3-3-5, and it is address-driven in a similar way to services but with an important threshold question layered on top.
Start with the scope of use. Where the IPP can only be used in a particular province, or where use is otherwise restricted to a particular province, that province is the place of supply regardless of the recipient's address. A licence that by its terms permits use only at an Ontario facility is an Ontario supply even if the licensee's head office sits in Winnipeg.
Where use is not restricted to a particular province, the analysis moves to an address hierarchy that parallels the services rule. A single Canadian address obtained in the ordinary course of business governs. More than one address requires identifying the one most closely connected with the supply. Where no Canadian address is obtained, the rules look to where the property can be used.
For Ontario businesses selling software subscriptions, online courses, or licensed content to customers across Canada, two things follow. First, the licence terms themselves are part of the tax analysis, because a geographic restriction can override everything else. Second, the customer address captured at checkout is not just a billing detail. It is the evidence your rate depends on.
Common Mistakes Ontario Businesses Make
Charging 13 percent to everyone. The single most common error is treating the supplier's home province as the default. Ontario HST applies to supplies made in Ontario, not to supplies made by Ontario businesses.
Not documenting the address at the time of supply. The general services rule turns on an address obtained "in the ordinary course of the business" of the supplier. That phrasing puts weight on your intake and invoicing process. A CRM record, an engagement letter, or an invoice showing the address you actually had at the time is what makes the position defensible three years later.
Treating remote delivery as decisive. Doing the work from a Toronto desk does not make it an Ontario supply. Under the general rule, the client's address controls.
Skipping the specific-rule check. Real property, personal services, and telecommunications services have their own rules. Applying the general address hierarchy to a supply that is actually governed by a specific rule produces the wrong rate even when the arithmetic is careful.
Confusing place of supply with registration. These are separate questions with separate tests, and getting one right says nothing about the other.
Assuming a different GST/HST election covers it. Business owners sometimes conflate ongoing invoicing with transactional elections. The GST44 election, for instance, deals with the sale of a business as a going concern under section 167(1). It is a related but distinct part of the GST/HST regime and has no bearing on what rate you charge on regular sales.
Frequently Asked Questions
Do I charge HST or GST to an out-of-province client?
It depends on the place of supply, not on where your business is located. If the place of supply is a participating province, you charge that province's HST. If it is a non-participating province such as Alberta or British Columbia, you charge 5 percent GST. For services, the place of supply is usually determined by the client's Canadian address obtained in the ordinary course of business.
What happens if I charge the wrong GST/HST rate?
If you undercharged, the CRA can assess your business for the difference plus interest, and the liability sits with you as the registrant whether or not you can recover it from the client. If you overcharged, you have collected tax the client did not owe, which generally means issuing a credit and adjusting your return.
Does place of supply depend on where the work is performed or where the client is located?
For most services, the client's address governs under the general rule. Where the work is performed only becomes relevant if no Canadian address of the recipient is obtained, or if a specific rule applies, such as services in relation to real property.
What is the place of supply rule for digital products or software licences?
These are intangible personal property. If use is restricted to one province, that province governs. Otherwise, an address hierarchy similar to the services rule applies, based on the Canadian address obtained in the ordinary course of business.
Is place of supply the same as GST/HST registration?
No. Registration determines whether your business must collect GST/HST at all, based on worldwide taxable revenue. Place of supply determines which rate applies once you are registered and making taxable supplies. A business can be fully compliant on registration and still be assessed for years of mis-rated invoices if it never worked through the place of supply rules.
This article provides general information and is not legal or tax advice. Place of supply determinations are fact-specific. Contact a lawyer to discuss your circumstances.
Sources & Official Resources
Federal Statutes Cited
- Excise Tax Act, RSC 1985, c E-15 - Part IX (GST/HST) and Schedule IX (Place of Supply)
CRA Rate Information 2. CRA - Charge and Collect the Tax: Place of Supply
CRA GST/HST Memoranda and Policy Statements Cited 3. Memorandum 3-3-1 - Drop Shipments 4. Memorandum 3-3-6 - Place of Supply in a Province, General Rules for Services 5. Memorandum 3-3-6-1 - Personal Services, Services in Relation to Property and Telecommunication Services 6. Memorandum 3-3-5 - Place of Supply in a Province, General Rules for Intangible Personal Property 7. Policy Statement P-219 - Place of Supply (HST) for National Equipment Maintenance Contracts
Helpful Resources 8. Law Society of Ontario - Find a Lawyer
Contact Hadri Law
If your business bills clients in more than one province, or you are not confident the rate on your invoices is the right one, a review of your invoicing practices is usually a short exercise with a meaningful payoff. Martina Caunedo, our tax lawyer, brings more than 12 years of tax experience, including CRA audits, objections, and Tax Court appeals, and works alongside our corporate team on the corporate tax side of exactly these issues.
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