GST/HST information for freight carriers

Notice to reader

The information on this page replaces the information in Guide RC4080, GST/HST Information for Freight Carriers, which has been discontinued.


Find out about the GST/HST and freight transportation carriers

A supply of a freight transportation service made in Canada can be taxable at the usual rate for a province, or it can be zero-rated (taxable at 0%). If you are a GST/HST registrant, you have to collect the GST/HST on amounts you charge for a taxable supply of a freight transportation service unless the service is zero-rated.

As a registrant, you can generally claim input tax credits (ITCs) to recover the GST/HST paid or payable on your business purchases such as gas, commercial rent, and advertising. You have to keep records of the amounts you pay or owe to support your ITC claims. You may be able to use the simplified method for claiming ITCs. For more information, see Simplified method to claim input tax credits.

You also have to complete and file GST/HST returns according to your reporting period. This will be either annually, quarterly, or monthly.

For more information, see File a GST/HST return.

When you complete your GST/HST return, you have to use the regular method of calculating your net tax, unless you tell us that you want to use the quick method of accounting. For more information on who and how you can use this method, see How to calculate your net tax.

Different services considered freight transportation services for GST/HST purposes

Freight transportation service means the service of transporting goods. In certain circumstances, other services may or may not be considered freight transportation services. The following provides a description of services which may be freight transportation services:

Driving services 

The service of a driver is usually not a freight transportation service. This is the case when, for example, a self-employed driver does not use his or her own truck and does not assume responsibility for the supply of the freight transportation service. The driver is then supplying a driving service.

Freight forwarder's services 

Freight forwarders usually act as agents on behalf of their clients. They mainly assist shippers with the preparation and booking of a freight transportation service.

A freight forwarder is not a carrier providing a freight transportation service when the freight forwarder acts as an agent for a shipper and does not assume responsibility for the transportation of the goods.

However, a freight forwarder is providing a freight transportation service if the freight forwarder is a carrier and assumes responsibility for the transportation of goods.

Pilot car services 

A pilot car service is a service of providing a marker vehicle for a carrier when the carrier moves a load that exceeds legislated dimensions for travel on roads and highways. The pilot car service is part of the freight transportation service when the pilot car service is provided by the carrier.

If an independent contractor or someone other than the carrier provides the pilot car service, the service is not part of a freight transportation service. 

Reload centre services 

A reload centre is used as a cross-dock operation when goods are transported to the facility by rail or by truck. The goods are unloaded and, if not immediately reloaded for further transport, are stored for a short period of time (usually 30 days or less). If the goods are not processed or altered in any way while they are in the facility, the services supplied at reload centres are freight transportation services.

Repositioning a conveyance 

Carriers may charge empty mile charges for the repositioning of a conveyance. This service is incidental to, or part of, a freight transportation service when the charge relates to a specific freight movement. Documents, such as a probill or trip number on the driver's pay stub, have to be kept to show that the charge is incidental to, or part of, a freight transportation service.

Shunting services 

A service of transferring trailers from a client's yard to a loading dock (shunting) is a freight transportation service.

Stevedoring services 

Stevedoring (the loading and unloading of ships) is a freight transportation service and persons providing these services are carriers.

Towing services 

The service of towing a vehicle from the site of an accident or breakdown is a freight transportation service. Roadside services (for example, car boosting, winching, and unlocking doors) are not freight transportation services since these services do not involve the transportation of goods. If the tow truck operator provides car boosting or other services before towing a vehicle, the car boosting or other services may be incidental to, or part of the freight transportation services.

Find out if you need to register for a GST/HST account

Generally, you have to register for the GST/HST if:

  • you provide taxable supplies of property and services in Canada
  • you are not a small supplier

Even if you do not have to register, it may be beneficial to register voluntarily.

For more information, see Register for a GST/HST account.

Find out how the GST/HST applies to freight transportation services

It is important to know whether a supply is subject to the GST/HST and if so, at which rate.

1. The tax status of the services and expenses

Use the following tabs to determine the tax status of the service you provide and the expenses that you incur.

Taxable supplies (other than zero-rated)
Taxable supplies (other than zero-rated)

This means that:

  • You charge and collect the GST/HST on the supplies that are made in Canada.
  • You may be eligible to claim ITCs to recover the GST/HST paid or payable on purchases made to provide them.

Most domestic freight transportation services (services that originate and terminate in Canada) are subject to the HST for destinations within the participating provinces and to the GST for destinations in the rest of Canada. If you provide a freight transportation service that takes place partly outside Canada, but both the origin and destination are in Canada, it is considered a domestic service.

See examples of taxable supplies

Zero-rated (taxable at 0%)
Zero-rated supplies of goods and services

This means that:

  • GST/HST of 0% is charged, so that you do not collect the GST/HST on these supplies.
  • You may be eligible to claim ITCs to recover the GST/HST paid or payable on purchases made to provide them.

International freight transportation services generally are zero-rated when the services involve:

  • transportation of goods from a place in Canada to a place outside Canada when the freight charge is $5 or more
  • transportation of goods from a place outside Canada to a place in Canada
  • transportation of goods from a place outside Canada to another place outside Canada, even if the goods pass through Canada

Domestic freight transportation services generally are zero-rated when the services involve:

Additional information may be found in GST/HST Memorandum 28.2, Freight Transportation Services.

See examples of a zero-rated supplies

Exempt
Exempt supplies of goods and services

This means that:

  • You do not charge or collect the GST/HST.
  • You cannot claim ITCs to recover the GST/HST paid or payable on expenses related to making such supplies.

See examples of a exempt supplies

2. If the freight transportation service has an interlining agreement

Several carriers may take part in the supply of a freight transportation service during the course of a continuous freight movement from the shipper to the consignee, but only one carrier invoices the customer. This process is called interlining.

Only the invoicing carrier who settles the freight bill directly with the customer (either the shipper in the case of a prepaid move, or the consignee in the case of a collect haul), is responsible for charging and collecting any applicable GST/HST.

Supplies of freight transportation services between interlining carriers are zero-rated. This is the case even if the invoicing carrier is acting as an agent for the other carriers for collecting the GST/HST.

When a person whose business includes the supply of freight transportation services is shipping his or her own goods and transfers possession of those goods to a carrier, that person is the shipper of the goods and not a carrier. In this case, the interlining rules do not apply.

See example of an interlining agreement

If an owner-operator provides a freight transportation service on behalf of a carrier and that carrier remains responsible for invoicing the customer, the services provided by the owner-operator are zero-rated since the owner-operator is an interlining carrier and is not the invoicing carrier.

Different situations related to the interlining process
Chargeback

Chargeback

Interlining may also involve transactions, other than freight transportation services, between the first carrier and the subsequent carrier (a chargeback). A chargeback for supplies used in the transportation of freight from one freight carrier to another freight carrier (such as a truck-owner operator), is not a supply of a freight transportation service. A chargeback is usually for property and services (such as fuel, truck repairs, maintenance, or permits) used to provide freight transportation services but are not freight transportation services themselves. A chargeback is usually subject to the GST/HST.

See example of a chargeback

Courier services

Courier services

The interlining rules also apply to courier services. For example, when a freight company contracts with a courier to pick up or deliver goods to the freight company, the courier bills the freight company for the service and, in turn, the freight company bills either the shipper or the consignee. The courier does not charge the GST/HST on its service because it is an interlining carrier and it is not the invoicing carrier.

When a courier company contracts with a person to deliver goods, the courier company issues an invoice to its customer and is responsible for charging and collecting the GST/HST. Persons who are under contract with the courier company to make deliveries and who do not invoice the customer directly can zero-rate their services to the courier company because they are interlining carriers.

As a courier providing only interline freight transportation services, you do not collect the GST/HST from the carrier for those services. In this case, even if you are a small supplier, you would benefit from registering for the GST/HST since you would be able to claim input tax credits for the GST/HST you pay or owe on expenses related to your interline services.

Gravel pit owners and dump truck operators

Gravel pit owners and dump truck operators

It is common for a contractor who has been hired to build a road to own a gravel pit and to supply the gravel needed to build the road from its pit. Given the volume of gravel required to build the road, the contractor will often subcontract with a dump truck operator to transport the gravel to the road construction site.

The interline provisions would not apply in the case described above. In these circumstances, the gravel pit owner (contractor) would be considered to be the shipper of the goods, not the carrier. For the interline provisions to apply, there must be at least two carriers. In this case, the dump truck operator is the only carrier. As such, the zero-rating provisions do not apply, and the GST/HST applies to the supply of the transportation service.

Tow truck operators

Tow truck operators

The service of towing a vehicle from the site of an accident or breakdown is a freight transportation service. Roadside services (for example, car boosting, winching, and unlocking doors) generally are not freight transportation services by themselves since these services do not involve the transportation of goods. However, if the tow truck operator provides car boosting or other services before towing a vehicle, the car boosting or other services may be incidental to, or part of, the freight transportation services.

The interlining rules also apply to the service of towing a vehicle from the site of an accident or breakdown. When self-employed contractors (operators) work for a GST/HST registered tow truck company, the services provided by the operators to the tow truck company are zero-rated and the tow truck company (as the invoicing carrier) is responsible for charging and collecting the GST/HST from the customers.

As a truck owner-operator or tow truck operator who provides only interline freight transportation services, you do not collect GST/HST from the carrier for those services. In this case, even if you are a small supplier, you would benefit from registering for the GST/HST since you would be able to claim input tax credits for GST/HST you pay or owe on expenses related to your interline services.

See example of a towing and related roadside service

3. If property and services you provide are incidental to, or part of, freight transportation services

Under certain circumstances, a freight transportation service may also include other property or services that are incidental to, or part of, the freight transportation service. Some examples of property and services that may be incidental to, or part of, a freight transportation service include:

  • storage and warehousing
  • loading and unloading
  • refrigeration
  • packing

Property and services incidental to, or part of, a freight transportation service have the same tax status as the supply of the freight transportation service.

4. If other freight and miscellaneous charges apply

Demurrage payments and penalties 

Amounts that a shipper pays a carrier for the detention of a ship, freight car, or other cargo conveyance during loading or unloading beyond the scheduled time of departure. 

Insurance 

Carriers often provide their clients with some protection against losses or damages. They can self-insure their client's property by including a risk premium in their charge or by charging a separate amount to their client for risk protection. In these cases, they are self-insuring against claims for losses or damages. The charge to their client for this protection takes the same tax status as the freight charge for GST/HST purposes because it is incidental to, or part of, the freight transportation service.

If a carrier acts as an agent for an insurance company to arrange insurance coverage on the client's property, the carrier does not collect the GST/HST on premiums paid to the insurance company.

Fuel surcharge 

Fuel surcharge may be added to invoices for the supply of transportation services to recover some or all of the increased cost of fuel instead of adjusting the price for the transportation service.

Where the supply of a transportation service is taxable, the entire charge for that service, including the fuel surcharge, is subject to the GST/HST at the same rate. Where the supply of a transportation service is zero-rated, the entire charge for that supply of a transportation service, including the fuel surcharge, is zero-rated.

Loss or damage claim settlements 

If freight is lost or damaged in transit, the carrier may be required under the terms of the agreement to replace the goods or otherwise compensate the customer. A damage claim settlement paid by a carrier to a claimant is generally not subject to the GST/HST.

Loss or damage claim settlements are different from a reduction in freight charges. A reduction in freight charges is an adjustment to the original invoice. For more information, see Guide RC4022, General Information for GST/HST Registrants.

Mileage credits 

A rail carrier pays the owners of railway cars a fee when shippers use cars that the rail carrier does not own. This fee is referred to as a mileage credit.

When a railway carrier passes this cost on to the shipper, the invoice to the shipper should reflect the GST/HST on both the gross rental charge and on the mileage credit.

Sufferance warehouse 

The Canada Border Services Agency (CBSA) licenses sufferance warehouses for the inspection and clearance of imported goods by the CBSA before they are released.

Sufferance warehouse services (including the handling and storage services a sufferance warehouse operator provides for imported goods) are zero-rated when the purpose of the service is to enable the examination of these goods before release. The zero-rating does not apply to office rents and bay rental fees charged to tenants and fees for preparing entry documents (other than re-manifesting fees incidental to the handling and storage of goods).

Find out which GST/HST rate to charge

The rate of tax charged for freight transportation services made in Canada generally depends on the destination of the service. Most domestic freight transportation services are subject to the HST for destinations within the participating provinces and to the GST for destinations in the rest of Canada.

However, where goods are transported from a place in Canada to another place in Canada, the freight transportation service may, if certain conditions are met, be zero-rated if the service is part of a continuous inbound freight movement or continuous outbound freight movement, or an interlining agreement that is part of a continuous freight movement.

The following table explains how to determine which GST/HST rate to use for freight transportation services:

Rate of GST/HST to apply
Originates Destination What tax rate do you use?
Canada Alberta, British Columbia, Manitoba, Northwest Territories, Nunavut, Quebec, Saskatchewan, or Yukon GST at 5%
Canada New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, or Prince Edward Island HST at the applicable rate for the province of destination
Canada Outside Canada (if the charge for the freight transportation service is $5 or more) GST at 0% (zero-rated), if conditions for zero-rating are met
Outside Canada Canada GST at 0% (zero-rated), if conditions for zero-rating are met
Outside Canada Outside Canada (even if the goods pass through Canada) GST at 0% (zero-rated), if conditions for zero-rating are met

If you make other supplies of property or services, see Place of supply rules to determine if your other supplies are subject to the GST or HST. 

If you are supplying property or services for export, see Import and exports.

See example - Originates in Quebec and final destination in Ontario

How to report the GST/HST

Report

Form to use to report the GST/HST

If you supply taxable property and services where GST/HST applies, you are required to file the following:

  • GST34, Goods and Services Tax/Harmonized Sales Tax Return for Registrants (or Form GST62, Goods and Services Tax/Harmonized Sales Tax Return (Non-personalized))

For more information, see How to file your GST/HST return.

Calculate your net tax

How do you calculate your net tax?

You need to calculate your business's net tax for each reporting period and report this on your GST/HST return. To do so, you calculate the following:

  • the GST/HST collected and collectible on your taxable supplies made during the reporting period
  • the GST/HST paid and payable on your business purchases and expenses for which you can claim an ITC

The difference between these two amounts (your tax collected and collectible and your ITCs), including any adjustments, is called your net tax.

You have to use the regular method of calculating your net tax, unless you tell us that you want to use the quick method of accounting. For more information on who and how you can use this method, see How to calculate your net tax.

You can claim ITCs for the GST/HST paid or payable on your business purchases such as:

  • gasoline, diesel fuel, and propane
  • vehicle repairs, maintenance, and washes
  • vehicle leases and purchases

You cannot claim ITCs for insurance costs or interest as they are not subject to the GST/HST.

You cannot claim ITCs on most of your business purchases if you use the quick method. You may be able to use the simplified method for claiming ITCs. For more information, see Simplified method to claim input tax credits.

For more information on the net tax calculation, see Calculate the net tax to complete your GST/HST return.

Filing

How to file your GST/HST return

You can file your GST/HST return online.

You can also file:

  • in person at a participating financial institution
  • by mail by sending your paper GST/HST return (GST34-2 or GST62) to the address on the return

You also have to complete and file GST/HST returns according to your reporting period. This will be either annually, quarterly, or monthly.

For more information, see File a GST/HST return.

Amount/Refund due

If you have an amount due

If your net tax (line 109 of your GST/HST return) for a reporting period is a positive amount, you have to make a payment. In most cases your payment is due at the same time as your return. To learn more, see When to remit the GST/HST.

Use Form RC160, Remittance Voucher – Interim Payments to make instalment payments for the GST/HST.

You can calculate your instalment payments and view their related due dates online. To use the Instalment payment calculator service, go to My Business Account.

If you have a GST/HST refund

If your net tax (line 109 of your GST/HST return) for a reporting period is a negative amount, you can claim a refund.

You can receive your refund deposited directly into your bank account. If you are not already enrolled for direct deposit, you can sign up for it online using My Business Account, or you can fill out Form RC366, Direct Deposit Request for Businesses, and mail it to your tax centre.

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