Contributing Lawyers


Cyndee Todgham Cherniak

United States

Susan Kohn Ross


Andrew Hudson

Proposed HST Place of Supply Rules Are Game-Changers

On February 25, 2010 (88 days until harmonization implementation in Ontario and British Columbia), the Department of Finance released the proposed harmonized sales tax (HST) place of supply rules. Here is a link to the pages of place of supply rules -

All GST/HST registrants are generally required to collect the provincial HST component (at the applicable rate) on supplies of property and/or services made in a participating province except where a supply is zero-rated or exempt.

The HST place of supply rules are important for businesses that operate in or make supplies in or to recipients located in more than one Canadian province. The HST place of supply rules will be used by suppliers and recipients to determine whether a supply made in Canada is made in a participating province. Specific rules will apply depending on the nature of the supply.

The place of supply rules are important for businesses that make supplies in Ontario and British Columbia because of the different HST rates (Ontario will have a combined rate of 13% and British Columbia will have a combined rate of 12%). The place of supply rules are also important if a business makes supplies in both the HST Zone (British Columbia, Ontario, Nova Scotia, New Brunswick & Newfoundland.Labrador) and outside the HST Zone (Alberta, Saskatchewan, Manitoba, Quebec and Prince Edward Island). Some say that Alberta has harmonized at a provincial component rate of 0%. It should be remembered that Quebec is not a harmonized province because the Quebec Sales Tax is imposed under provincial legislation instead of the Excise Tax Act (Canada).

In addition, the HST place of supply rules are important for recipients outside the HST Zone who do not want to pay HST; especially if they cannot receive full input tax credits.

There is a lot of information in the proposal. Most important for businesses to recognize, many of the proposed place of supply rules are different than the current rules in the Excise Tax Act for supplies made in Nova Scotia, New Brunswick and Newfoundland/Labrador.

Sales tax experts are not surprised that there are significant changes. The government is attempting to remove incentives to move businesses to non-HST provinces (businesses outside the HST Zone). The most significant changes are found in the rules in respect of provisions of services and provisions of intangible property.

The Canada Revenue Agency will be releasing a multi-page document in the next day or so to provide their interpretation of the proposed place of supply rules. Canada Law Blog will post relevant articles over the next few days highlighting specific place of supply rules. The most complex rules relate to the provision of services and/or intangible property.

Comments on the proposed HST place of supply rules must be submitted by March 31, 2010. It is very important for businesses to consider whether they can implement the proposed rules and let the department of Finance know about any difficulties. This is one of those situations whether the phrase "If you snooze, you lose" may apply. We would be happy to help you apply the HST place of supply rules to your business and prepare submissions/comments for the Department of Finance.

It is important to act quickly because the deadline is March 31, 2010 for comments. The HST place of supply rules start to have effect 1 month +1 day later on May 1, 2010. Harmonization occurs on July 1, 2010.

If you have any questions, please do not hesitate to contact Cyndee Todgham Cherniak at 416-307-4168.

Leave a Reply

remember my information