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Sales Tax on Services

Sales tax on services is administered province by province, and this practice advises on all four. Each province runs its own regime for services — its own registration, its own return, its own authority — and all of them sit apart from the federal regime that applies to goods. A business can comfortably fall under several at once.

  • Service providers
  • Businesses with a services arm
  • Companies operating in more than one province
  • Contractors and consultants
  • Restaurants and hospitality

What we are usually called about

The questions this work arrives with

None of these is unusual and none of them is a failing. They are what happens when a business grows faster than the records, the systems and the filings that describe it.

Four provinces, four regimes

Each of the four provinces administers sales tax on services within its own borders, under its own law and its own authority. A business supplying services in more than one can find it holds more than one registration, files more than one return, and answers to more than one authority about the same contract.

Where a service is taxed

Where a service is supplied, where it is received and where the recipient is established can each point at a different province. That question is settled from the contract and the facts, and settled separately for each province with an interest in it.

Contracts that contain both

A contract that supplies equipment and installs it contains goods and services. Whether it is split, and how the invoice presents that split, decides which authority the tax belongs to.

Collection by the customer

Provincial regimes commonly place part of the collection obligation on the recipient of a service. Whether that applies to a given contract, and how each side records it, is better settled before the first invoice than after the first reconciliation.

More than one registration

Separate registrations mean separate returns and separate correspondence, each with its own record-keeping expectations and its own file to keep.

Input tax across the line

Tax borne on one side of the goods and services line and claimed on the other is among the more common reconciliation problems, and it is easier to prevent than to unwind.

How the work runs

What an engagement looks like

Scope and fees are agreed in advance and in writing, before any of this starts. Where a step turns out not to be needed, it is dropped rather than billed.

  1. 01

    Position review

    Establishing what services are supplied, in and into which provinces, and what registrations are already held. The position in each province is checked against that province's law as it currently stands rather than from a list kept on a website — including this one.

  2. 02

    Contract and invoice review

    Reading the contracts and the invoices actually issued, because the treatment follows what was supplied rather than what was intended.

  3. 03

    Written position

    Where the classification or the province is uncertain, a written analysis of the options and the basis for the one recommended.

  4. 04

    Filing and compliance

    Preparing or reviewing periodic returns for each registration the business holds.

  5. 05

    Representation

    Replying to notices and dealing with whichever provincial authority holds the file.

Scope

What an engagement can cover

A list of what the work can include, not a package. What is actually needed is settled after the first conversation and written into the engagement letter.

  • Registration support in any of the four provincial regimes
  • Review of contracts and invoicing for services supplied
  • Preparation or review of periodic returns for each registration
  • Analysis of composite arrangements containing both goods and services
  • Reconciliation of input tax across the goods and services line
  • Correspondence, notices and representation

Federal or provincial

Goods or services — the line between the two regimes

Sales tax on goods is a federal matter. Sales tax on services is a provincial one, and each province administers its own regime under its own law and its own authority. The practical consequence is that a transaction has to sit on one side of that line, and both sides have an interest in where it sits.

Composite arrangements are where it gets decided: equipment supplied with installation, software supplied with configuration, goods delivered under a contract that also carries a service. How the contract is written and how the invoice is raised usually settle the answer before anybody thinks to ask the question.

Being wrong in either direction has a cost — tax accounted for to one authority and then demanded by the other, or input tax claimed against the wrong regime. Because this practice advises on both sides of the line, the question can be looked at once rather than twice.

No rate, threshold or filing date is given here. Those change, and a position on a specific transaction needs the current law and the contract itself in front of it.

Who this is for

Where this work usually comes from

Retail

Chains running an ERP and a point of sale, where stock, margin and every invoice are now reported in real time.

Alongside this

One practice handles all of it, so nobody is coordinating between a systems consultant, a tax adviser and a bookkeeper.

Tax

Income Tax

Returns, notices, audits and appeals

A contract that contains both, or another province to register in?

You will get a plain answer on whether the practice can help, what it would involve, and what it would cost.

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