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Renting equipment in Canada and billing a US customer

By Gord Ahier |

Deb asked:

We are renting equipment in Canada and billing a US customer. Do they pay the HST?

Gord Ahier answered:

To answer this question, one must first determine whether the supply is made in Canada. Renting equipment falls under Excise Tax Act paragraph 142(1)(b) which states that if the equipment is being used by the recipient (the lessee) within Canada, the supply is considered to have been made in Canada and therefore is subject to tax. If the equipment is being used by the recipient outside of Canada, the supply is considered to have been made outside of Canada and therefore is not subject to tax.

Once it has been established that the supply has been made in Canada, one must then determine the province in which the supply is made. In the case of rental equipment, this would be the province in which the equipment is being used. If the equipment is being used in Ontario, then the US customer should be charged HST at 13 per cent.

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