One of the biggest changes at the transition date is the change to interprovincial place of supply rules. The emphasis has moved from the location of the supplier to the location of the recipient.

For the sale of goods, if the supplier ships or arranges for shipping via common carrier (ie. Fed Ex) the GST/HST rate should be charged based on the province of destination.  If the customer picks up the goods (over the counter transaction) the GST/HST is customer is considered to be in the same province as the supplier (ie. customer is standing at the counter). 

Q:        We ship 80% of our customer’s order to their warehouse in Ontario using our trucks, 10% to their warehouse in Quebec via UPS and about 10% of the order they pick up at our Ontario site when they have one of their trucks rolling by empty, but we don’t know whether the truck is going to Ontario or Quebec.  We sent the bill to their Ontario head office.  What rate do we charge?

A:         Shipments to the Ontario warehouse are subject to HST at 13%. Shipments to the Quebec warehouse are subject to 5% GST

Shipments picked up in Ontario are subject to 13% HST.  If the shipment ends up in Quebec, the customer is required to self assess the tax.

For the sale of services, the residence for of the client is the key determination, unless the service is performed on property or person located in another province.  Beware that there are a list of exceptions and special rules for certain industries. 

Ontario and BC are hubs for service providers.  It would negatively effect service businesses in Ontario if Ontario HST was to be charged on out of province client.  In a scenario where a large Alberta company (GST only) uses a payroll service based in Mississauga, the additional cost may force either the Alberta company to find a local service provider or the Mississauga company to relocate to a GST province.  This would have a severe negative impact to the Ontario economy.  Changing the tax rate to the destination of the client was a key factor in Ontario signing on to HST.

Q:        An individual from Alberta is visiting relatives in Ontario and runs some errands.  He gets a hair cut and charged 13% HST, he gets an oil change and charges 13%.  He stops into RLB and spends a half hour discussing whether or not the HST he was charged was correct and while he’s there, asks the accountant to prepare a HST new housing credit application for a vacation property located in Nova Scotia and pays his bill before leaving.  What’s are the HST consequences?

A:         Since the haircut was a personal service on the person, HST is charged where the person is when the services are performed, Ontario 13% HST is correct.

Since the oil change was a service on tangible property located in Ontario, Ontario 13% HST is correct.

The HST consulting services discussing the haircut and oil change are subject to 5% GST, since the recipient of the supply is a resident of Alberta and the service was not performed with respect to property or service on the person.

The HST compliance service performed with respect of real property located in Nova Scotia is subject to Nova Scotia 15% HST

Q:        Since my business has to charge based on where I ship my products or where my client is located for my services, does that mean I have to register for PST in the non-harmonized provinces?

A:         The requirement to register for PST in the non-harmonized provinces varies slightly from province to province.