How to invoice a U.S. company

by Kyle
(St Catharines Ontario)

How to invoice a U.S. company for work done in Canada

How to invoice a U.S. company for work done in Canada

My partner has a graphics design business and does work for a U.S. company (who recently acquired an Ontario business).

How should his invoices be done (regarding HST, etc)? How does getting income from the U.S. affect his income tax?

Thank you, Lake!

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Your partner probably should visit a certified accountant familiar with cross border rules for a consultation on place of supply rules. It's a very complicated area.

Is the Ontario business a separate entity from the U.S. business?

If yes, who is your partner working for … the U.S. company or the Ontario business?

At the end of the page for the link I gave you on place of supply rules, there is a flow chart from Deloitte's on services in Canada. Follow it through to assist you in your determination. It won't really help you with non-resident sales treatment.

It is my understanding that sales to non-residents are zero rated. However now that the U.S. business has a Canadian presence, GST/HST registration may be required.

I guess it's going to boil down to who is s/he working for and where was the service delivered as HST is generally based on the delivery location. The flow chart helps you to determine the delivery location.

As for the tax effect … as long as the sales are properly recorded and accounted for, your partner's business (whatever structure that is) is taxed on net profit … assuming the business does not have a U.S. presence and is located in Canada.

Like I said, it would be very worthwhile to have a consultation with a certified accountant versed in cross border issues. The small amount of money spent now could save you thousands down the road and better sleeps at night knowing you are handling the transactions correctly.

Comments for How to invoice a U.S. company

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Mar 15, 2014
More Info
by: Kyle Janz

A U.S. camping / RV company bought 2 properties in the U.S. and 1 here in Ontario (which were all previously owned by an England company). My partner does work mostly for the Ontario campground, but sends the bill to the head office in the U.S. (I believe Arizona), and it is mainly graphics projects for their marketing. So we're wondering if he should invoice them, for example, $500 + $65 (HST), or one lump sum $565. And should he be charging them HST in the first place?

Mar 18, 2014
See an accountant
by: Lake

Hey Kyle,

The best I can suggest is you work your way through Deloitte's place of supply flowchart for services as the campground you are doing the work for is in Ontario.

You need to determine the place you are supplying the service to. If this were a product, it would be where was the product shipped to.

Definitely no lump summing … HST is always to be shown as a separate item on the invoice.

If it is determined that the place of supply is in the U.S., then the sales tax rate would zero rated … which is different than exempt.

If it were me, I'd book a consult with a chartered accountant or call CRA and ask for a ruling. You don't want to be put in the situation where you are audited three or four years down the road and find out you have a huge tax bill because you have been handling the transactions

Mar 18, 2014
Very helpful
by: Kyle Janz

Thank you so much, Lake! We'll check with our CGA as you suggested. Spring is here in a couple of days. Yeah!

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