Selling Across the River: GST, HST and QST for Ottawa Businesses

An Ottawa business with customers in Gatineau is doing interprovincial trade, even though the customer is a fifteen minute drive away and the invoice looks identical to every other one you issue. The sales tax on it is not identical, and getting it wrong in either direction costs money.

Charge 13 percent HST to a Quebec customer and you have over-collected a tax that was never due, which you still have to remit and which your customer will eventually ask you to refund. Charge 5 percent to an Ontario customer and you have under-collected 8 points that the CRA will assess against you, not against the client who benefited.

The rule: where the supply is made, not where you are

The rate is determined by the place of supply, which is a defined concept rather than a synonym for your business address. The CRA’s guidance on place of supply and on which rate to use set out the framework. Ontario is a participating province with 13 percent HST. Quebec is not a participating province: supplies made there carry 5 percent GST federally, with the Quebec Sales Tax applied separately by Revenu Québec.

The general rules differ by what you are selling.

The CRA’s technical memoranda are the working references: 3-3-6 on services and 3-3-3 on tangible personal property. I have worked through the general framework in place of supply rules; this article is about what happens when the line you are crossing is the Ottawa River.

The address you obtain is the address that governs

For services, the ordinary rule turns on the recipient’s address obtained by the supplier in the ordinary course of business. Two consequences follow, and both are counterintuitive.

Where the work happens is usually not the test. A consultant based in Ottawa who does all the work at her own desk for a client whose business address is in Gatineau is generally making a supply in Quebec. The physical location of the laptop is not the deciding factor.

Which address you obtained matters. If a client gives you a Gatineau head office address and you invoice a Kanata branch, you have two addresses and the rules tell you which one to use. Pick one deliberately, record why, and be consistent. Inconsistency between your invoices and your client’s records is what audits are built on.

The practical instruction: capture the customer’s address at onboarding, store it against the customer record rather than on one invoice, and set the tax code from that field. Most bookkeeping systems will do this correctly if the customer record is right and incorrectly if it is not, which is a reason the discipline in a monthly close pays for itself.

QST: a separate registration, not a rate change

This is where Ottawa businesses most often get caught. Charging 5 percent GST instead of 13 percent HST is the easy half. The harder question is whether you must also register for and collect QST.

QST is administered by Revenu Québec, not the CRA. Registering for GST/HST does not register you for QST. The obligation turns on whether you are carrying on business in Quebec, and separately on specific rules that reach suppliers outside Quebec who sell into the province. Those rules have expanded in recent years and they are not symmetrical with the federal ones.

What this means for a business on this side of the river:

• Occasional sales to Quebec customers may leave you outside the QST system entirely, charging GST only.
• Regular activity in Quebec, particularly a physical presence, staff working there, or a volume of sales into the province, can pull you into QST registration.
• The consequence of getting it wrong is doubled, because you are dealing with two administrations with two audit programmes and two sets of penalties.

Confirm your position with Revenu Québec directly, in writing, before you build it into your invoicing. This is not a question to settle by pattern-matching to what another Ottawa business does.

Working out a single invoice

Who is the recipient, and what address did you obtain?
│
├── Ontario address
│       → 13% HST. Standard case.
│
├── Quebec address
│   ├── Are you required to be registered for QST?
│   │   ├── Yes → 5% GST plus QST, remitted separately
│   │   │         to Revenu Québec.
│   │   └── No  → 5% GST only. Do not charge HST.
│   │
│   └── Is the supply real property or goods delivered
│       somewhere other than the billing address?
│           → Apply the specific rule for that supply
│             type, not the address rule.
│
└── Two addresses, or no address obtained
        → Resolve it under the ordering rules and
          document the choice. Do not default to your
          own province because it is simpler.

The registration threshold has not changed

None of this alters when you must register federally in the first place. The small supplier threshold is based on worldwide taxable revenue over four consecutive calendar quarters, including that of associated persons, and Quebec sales count toward it. The CRA’s page on when to register sets out the test, and I have covered the practical timing in GST/HST registration for a small business.

A common misreading: a business that sells mostly into Quebec sometimes assumes its Quebec revenue does not count toward the federal threshold because those supplies are not HST. It does count. The threshold is about taxable supplies, and a 5 percent supply is a taxable supply.

Recovering tax you paid

The other direction matters too. If you buy from a Quebec supplier and are charged GST and QST, the GST is recoverable through your ordinary input tax credits on your GST/HST return. The QST is not recoverable on that return. It is recovered, if at all, through the Quebec system, and only if you are registered there.

That asymmetry is worth building into pricing. An Ottawa business that is not QST registered and buys materials in Gatineau is paying a tax it cannot recover, which quietly changes the comparison against an Ontario supplier.

Fixing it retroactively

If you have been charging the wrong rate, the exposure is real but usually manageable if you find it yourself. Under-collected HST is your liability, not the customer’s, and you can normally still invoice the customer for it if the relationship is live. Over-collected HST has to be remitted and then refunded or credited to the customer properly.

Send me a sample of invoices to Quebec customers, your customer address data, and your GST/HST returns for the last two years. I will tell you whether the rate applied is right, whether QST registration is likely to be required, and what the correction looks like before the CRA or Revenu Québec raises it. Get in touch.