Interprovincial Sales Tax Error

by Valerie
(Ottawa, Ontario, Canada)

We are a small business with offices located only in Ontario however we provide maintenance services for customers all over Ontario and Quebec. Since we do not have an office in Quebec we cannot get a Quebec tax number, but our Quebec customers do not pay the HST since they do not reside in Ontario.

We found out a few months ago that we can only charge the GST on sales and services for customers in Quebec. My issue is that now I have Quebec customers coming back to me asking for a credit for the HST that we charged them in the past.

Please note that that HST collected has already been reported, filed and paid to the CRA. How do we go about fixing this? I can't imagine that our business would need to absorb this cost at a loss because the wrong tax was collected.. I really need someone to shed some light on this subject.

Hi Valerie,

If it were me, I would credit the customer for the original invoice that incorrectly charged the HST and re-invoice with using the GST rate. The reason I like this method is because it gives the customer and myself a paper trail. As the new invoice will be offset by the credit memo, you should be able to refund the difference.

What do you think? Is there a reason you couldn't handle it this way?