Place of Supply Rules: Which Province's Tax Rate Applies?

Why Place of Supply Matters

In Canada, the tax rate on a transaction depends on where the supply is considered to be made. This matters because:

• A supply "made in" Ontario is taxed at 13% HST
• The same supply "made in" Alberta is taxed at 5% GST
• The same supply "made in" Quebec gets 5% GST + 9.975% QST

The rules are in ETA Part IX and CRA Policy Statement B-103. They're different for goods, services, and intangible property.

Rules for Tangible Personal Property (Goods)

For goods delivered or made available to the purchaser in Canada:

1. Shipped by the supplier: Place of supply is the destination province — where the goods are delivered
2. Picked up by the purchaser: Place of supply is where the goods are made available for pickup
3. Drop-shipped: Place of supply follows the ultimate delivery destination

Example

A manufacturer in Ontario ships widgets to a warehouse in Alberta. Even though the vendor is in Ontario, the place of supply is Alberta = 5% GST only.

Rules for Services

Services follow different rules depending on the type:

General Services

The place of supply is determined by the Canadian address of the recipient that is obtained in the ordinary course of business. In practice, this means the customer's billing address or main business location.

Services Related to Real Property

Place of supply is where the real property is located. A Toronto architect designing a building in Vancouver charges BC rates.

Services Related to Tangible Personal Property

If the service involves work on physical goods (repair, maintenance), place of supply is where the goods are at the time of service.

Computer-Related Services and Telecommunications

Special rules apply — generally based on the location where the service is used.

Common Errors We Find

1. Vendor uses their own province: A BC vendor charges 5% GST + 7% PST on a service delivered to an Ontario client. Should be 13% HST.
2. Head office vs. branch: Vendor bills the head office province instead of the branch receiving the service.
3. Real property exception missed: General service rules applied instead of real property rules for construction/renovation services.

How This Connects to Recovery

Place of supply errors create two types of issues:

• Overpayment: Wrong (higher) rate charged → recoverable difference
• Underpayment: Wrong (lower) rate charged → audit exposure

Our Type 4 detector compares the billed province against the expected place of supply based on delivery addresses, service types, and vendor locations.