By OptiVal Editorial Desk
A US customer places a $40,000 order with your Ontario business. Do you add 13% HST? If you are shipping that order across the border, the answer is usually no. Exports are zero-rated for GST/HST, which means you charge 0% and still claim the tax you paid on your inputs. It sounds simple, and it is, until CRA asks for proof. Zero-rating is a documentation game: get the paperwork right and you keep every dollar; get it wrong and CRA treats the sale as taxable and sends you the bill. Here is how GST/HST on sales to US clients actually works, what records to keep, and where businesses most often slip up.
What “zero-rated” actually means (and why it beats “exempt”)
Zero-rated means taxable at 0%. That one word, taxable, is doing a lot of work. Because the supply is still technically taxable, you can claim input tax credits (ITCs) on everything you bought to make or deliver it. Compare that with exempt supplies, like most financial services, where the GST/HST you pay on inputs becomes a dead cost buried in your margins.
This is the whole point of zero-rating: Canada’s tax system does not want GST/HST stuck inside exported goods, so it lets you recover the tax you paid upstream. Take that $40,000 parts order. Suppose you paid $6,500 of HST on steel, subcontracting, and freight getting the parts built and shipped. You charge the US customer 0% HST, and you claim the $6,500 back as ITCs on your return. The customer pays no Canadian sales tax, and you are not out of pocket for the tax embedded in your costs. That is the system working as designed.
GST/HST on sales to US clients: the goods rules
CRA’s GST/HST Memorandum 4.5.2 sets out the three situations where a sale of goods is zero-rated as an export:
- You ship the property to a destination outside Canada that is specified in the contract for carriage.
- You transfer possession to a common carrier or consignee, retained either by you on the customer’s behalf or by the customer’s employer, to ship the property to a destination outside Canada.
- You send the property by mail or courier to an address outside Canada.
In plain terms: the goods have to actually leave Canada, and the shipping documents have to say so. On your invoice, show a 0% GST/HST line rather than leaving the tax line blank, so the zero-rating is explicit.
One thing worth separating: the current US tariff measures are US import duties, collected by US customs. They have nothing to do with your GST/HST return. Zero-rating still applies on the Canadian side regardless of what duties your customer faces at the border.
Services, consulting and digital products for US clients
Services follow a different section of the law but land in the same place: services performed for a non-resident client and used outside Canada are generally zero-rated. A Toronto consultant billing a Chicago client for strategy work delivered remotely charges 0%. There are exceptions, including work tied to Canadian real property or services performed on goods located in Canada, so anything unusual deserves a second look.
For digital products and software sold to US customers, the sale is outside the GST/HST system entirely when the customer and the use are outside Canada. The documentation burden here is lighter, but it still exists: keep contracts showing the client is a non-resident, billing addresses outside Canada, and payment records. If your customer list is a mix of Canadian and US clients, keeping those address records current is what lets you defend the split.
The proof-of-export file CRA wants to see
This is the part that matters most, because this is where audits are won or lost. CRA does not take “it went to the US” on faith. Its evidence standard is that you must be able to trace the entire shipment from its origin in Canada to the point it leaves Canada for a foreign destination. Build a per-shipment file with:
- the commercial invoice or purchase contract identifying the property and the customer, matched with the shipping or delivery instructions on the purchase order;
- the transport document describing the delivery service, typically a bill of lading issued by or on behalf of the carrier (a pro-bill, waybill, sea waybill, freight receipt, or combined transport document works where bills of lading are not used in your trade);
- the customs broker’s or freight forwarder’s invoice relating to the exported goods;
- the import documentation required by the destination country, and for the US specifically, an embossed copy of the US Entry Summary, Form 7501 (this document only counts if it was completed at the moment of exportation);
- any other evidence, not generated internally by the customer, that shows the goods were exported.
Keep each shipment’s file for six years from the end of the tax year it relates to, which is the CRA records-retention rule for all business records.
Mistakes that turn zero-rated sales into taxable ones
1. Delivering to a Canadian address. If your “US sale” ships to the customer’s Canadian warehouse, that is a domestic taxable supply. Charge full GST/HST (13% in Ontario, 5% GST in non-participating provinces, and the applicable HST rate in the other participating provinces). There is a narrow exception where the US customer exports the goods themselves, and it comes with strict conditions: the customer must intend to export at the time of the sale, export as soon as reasonably possible, not consume or use the goods in Canada first, not process or alter them beyond what transport requires, and you must maintain the export evidence. If a customer asks you to zero-rate a Canada-delivered sale on that basis, get the conditions confirmed in writing first.
2. Zero-rating with no paperwork. Charging 0% and hoping is the single most expensive version of this mistake. If CRA audits and you cannot trace the shipment, it reassesses the sale as taxable and you pay the GST/HST out of pocket, plus interest and penalties. The tax you “saved” the customer becomes your bill.
3. Confusing “the customer is American” with “the supply is exported.” A US client who buys services you perform and consume in Canada, for example repair work on equipment sitting in your Ontario shop, is generally buying a taxable Canadian supply. Nationality of the customer does not decide it; where the supply happens does.
4. Forgetting the return still matters. Zero-rated sales go on your GST/HST return: report the sales, collect $0. And claim your ITCs. Exporters with large ITCs and no tax collected often end up with refunds, which is the system rewarding correct paperwork.
What this means for your bookkeeping and HST filings
Set up a dedicated 0%-rated tax code in your accounting software for export sales, separate from your domestic codes, so the return splits correctly without manual spreadsheets. At each filing, reconcile the export tax code against your proof-of-export files. Quarterly filers should make this part of the quarter-end routine, not an annual scramble. File the carrier and broker paperwork with the sales invoice, not in a separate pile nobody connects back. And if export sales are growing, your ITC position usually grows with them, which makes filing on time worth real money instead of a chore.
Related reading: if you have not registered yet, our guide to the $30,000 threshold explains when Canadian businesses must start charging GST/HST.
The official reference for the export rules is CRA’s GST/HST Memorandum 4.5.2, Exports: Tangible Personal Property.
Get your export paperwork right the first time
Selling into the US and want the paperwork handled properly? Our HST filings start at $99/quarter, and our bookkeeping plans start at $199/month. Book a free consultation and we will make sure your export sales are coded, documented, and filed correctly.
