Whether you are transporting goods within a province, across provincial borders, or internationally, calculating the correct amount of GST/HST to charge is essential for accurate billing and tax compliance.

So is understanding when zero-rate services apply.

Transporting goods within Canada

In general, the applicable GST/HST rate to charge for domestic freight transportation services is based on the shipment’s destination.

Shipments to Ontario are subject to 13% HST, while those to Nova Scotia are taxed at 14%. Newfoundland and Labrador, Prince Edward Island, and New Brunswick apply a 15% HST rate.

For shipments to all other provinces and territories, the GST rate is 5%, and a separate provincial sales tax may apply.

For shipments with multiple provincial destinations, the freight transportation service to each province or territory is treated independently, with GST/HST applied based on the rate applicable for that province or territory.

The fee for each deemed separate service is based on the part of the total charge that can be reasonably attributed to transporting goods to each destination. As a result, each deemed separate service may be subject to a different GST/HST rate.

Transporting goods across international borders

Most freight transportation services between Canada and the U.S. or another country are zero‑rated for GST/HST purposes. This means that while the service is technically taxable, the tax is charged at a rate of 0% and no GST/HST is charged.

Broadly speaking, the following types of freight transportation services may be zero-rated: inbound and outbound shipments; domestic legs of export shipment; in-transit international shipments; and post-importation movements. To qualify for zero-rating, the service must meet specific conditions.

Interlining freight

For some freight movements, trucking companies subcontract portions of a shipment to other carriers and participate in interlining. These arrangements can apply to both domestic and international shipments. In an interlining scenario, the subcontracted services may qualify for zero-rating under the GST/HST rules.

Establishing whether trucking companies are considered to be interlining, and whether the subcontractor’s freight transportation services are zero-rated, requires a close review of the relevant contracts and how the freight transportation services are structured.

Additional services

Trucking companies often provide more than just freight transportation services. Services like packing, loading and unloading, warehousing, or refrigeration may also be offered to shippers.

How these additional services are treated for GST/HST purposes depends on whether they are considered part of the freight transportation service or a separate standalone service.

If the additional service is incidental to a specific freight movement it may be considered part of the freight transportation service. In that case, the GST/HST rate to charge on add-on fees would depend on the GST/HST treatment of the underlying freight transportation service. For example, if the freight transportation service qualifies for zero-rating, the incidental service may also be zero-rated.

However, if the additional service is separate and, for example, not directly tied to a specific freight movement or is provided by a different company, it may be treated as a stand-alone service. In that case, the applicable GST/HST rate to charge on add-on fees could differ from the rate charged for the freight transportation service.

Be proactive with GST/HST compliance

The content of this article generally applies to trucking companies and other businesses that act as a “carrier,” being a person that assumes liability for the transportation of the goods such as some non-asset-based brokerages and freight forwarders.

The company does not need to perform the freight transportation services to be a “carrier.” However, a business that only acts as an agent on behalf of a shipper or a consignee is not providing freight transportation services and different GST/HST rules apply.

Sales tax rules for freight transportation services can be complex. This article provides a high‑level overview, but the GST/HST treatment for a particular service often depends on defined terms, specific conditions, and the particulars of the arrangement.

To avoid issues with the tax authorities, it is important to seek professional advice from an advisor familiar with the transportation industry, understand how the rules apply to your operations, and implement appropriate billing procedures. Getting it right from the start can save time, mitigate against unnecessary tax exposure, and help you avoid potholes.