Tax Memo: HST Place of Supply Rules Overhauled (Updated October 20, 2010)

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Effective July 1, 2010, Ontario and British Columbia joined Nova Scotia, New Brunswick, and Newfoundland and Labrador (collectively, the participating provinces) in implementing the Harmonized Sales Tax (HST). The HST applies at the rate of 12% in British Columbia, 15% in Nova Scotia and 13% in the other three participating provinces.

On February 25, 2010, the Department of Finance announced major changes to the HST place of supply rules and the Canada Revenue Agency has since released a revised version of GST/HST Technical Information Bulletin B-103 “Harmonized Sales Tax — Place of supply rules for determining whether a supply is made in a province.” As well, on June 9, 2010, the New Harmonized Value-added Tax System Regulations (the Regulations) were released, incorporating all the changes to the place of supply rules that apply to the participating provinces.

The place of supply rules determine the province in which a supply is deemed to be made for purposes of determining the tax rate GST/HST registrants should charge on taxable supplies made in Canada. Since May 1, 2010, registrants in all provinces had to contend with a new regime of place of supply rules that required substantial changes to their billing systems. In addition, supplies made after February 25, 2010, and before May 1, 2010, were subject to these changes if the consideration for the supply did not become due, and was not paid, before May 1, 2010.

Some of the key changes reflect a move away from taxing based on the location of the supplier to taxing based on the location of the purchaser i.e., the place of consumption. This Tax Memo provides a brief overview of the main place of supply rules under the new regime and as outlined in Bulletin B-103 and the regulations.