GST/HST on Sales to Status Customers and Bands on Reserve

Do I charge GST/HST to a First Nations band or a customer with Indian status?

Often not, but only when three things line up: who the buyer is, where the goods go or the work is done, and the proof you hold. The relief is administrative policy that follows section 87 of the Indian Act, which exempts the personal property of an Indian or a band situated on a reserve from taxation (CRA bulletin B-039). It is not a general exemption: the same customer pays GST/HST on an off-reserve purchase carried away. "Status" here means registered under the Indian Act, shown by a status card. People call this "tax exempt", but it is relief, not an exempt supply under the Excise Tax Act: the sale stays taxable, which is why it counts toward registration and keeps your input tax credits (exempt, zero-rated and out-of-scope).

1. Buyer: a person registered under the Indian Act, an Indian band, or a band-empowered entity (such as a band council or a corporation a band owns).
2. Place: goods sold on a reserve or delivered to one by you or your agent; a service performed entirely on a reserve (bands follow their own service rule below).
3. Proof: the buyer's status number or the band's certificate, plus proof of delivery when you deliver.

A case is not simple when you sell both on and off a reserve, the customer carries goods away in their own vehicle, the sale is in Ontario, the sale is by phone or online, the buyer is a corporation owned by a band, the customer has no proof with them, or the CRA has asked you to show proof for past sales. The rule here is the federal GST/HST one; the Ontario credit, PST and QST are separate. Gather the buyer's status registry number or the band's certificate, your delivery records, and your invoices sorted by where the goods went or the work was done.

Who qualifies for relief, and who does not?

Three kinds of buyer qualify: a person registered under the Indian Act, an Indian band, and a band-empowered entity. Inuit and Métis customers do not (CRA). This guide calls a person registered under the Indian Act a "status customer".

"Band management" means activities or programs that are not commercial activities for which the band or entity could claim input tax credits. The output of the activity decides, not its aim, so a band-owned commercial business is generally not buying for band management (B-039).

When is a sale of goods relieved?

Goods are relieved when an eligible buyer buys them on a reserve, or buys them elsewhere and you or your agent deliver them to a reserve, and you hold the proof. They are taxable when the buyer carries them away from an off-reserve seller, or when they are imported (CRA; B-039).

A qualifying "remote store" need not deliver to a reserve. It must meet one of the options in CRA Policy Statement P-246, keep the same documents, and tell its tax services office each year how it operates (CRA).

When is a service relieved?

For a status customer, a service on property is relieved when the work is done entirely on a reserve and the property is there at that time. A personal service, such as a haircut, also requires the customer to be on the reserve while it is performed (B-039). A service is also relieved when a band or band-empowered entity buys it for band management or for real property on a reserve (CRA).

The CRA's example of a mixed job, a computer repair split between a reserve and an off-reserve shop, is taxable. A band that pays tax on off-reserve travel for band management may recover it by rebate (Form GST189, reason code 8).

What proof do I keep?

Record the buyer's status number on the invoice or keep the band's certificate, and keep proof of delivery when you deliver. Relief depends on these documents, so a sale without them is exposed to tax. If the buyer cannot show proof at the time of sale, charge the tax; an eligible buyer can recover it afterward (see the section on charging tax in error, below) (CRA; B-039).

B-039 states no retention period for these records. The usual GST/HST rule is 6 years from the end of the year the records relate to (CRA).

What do I charge in Ontario on an off-reserve sale to a status customer?

In Ontario, you may charge only the 5% federal part and credit the 8% provincial part when an eligible customer buys qualifying goods or services off a reserve, in person, with a valid card (Ontario). The credit is optional for the seller; a customer who is not given it can claim the provincial part afterward. This credit is separate from the Indian Act relief, which can relieve the whole HST where it applies, such as a delivery to a reserve.

• Who qualifies: an individual who is an Ontario resident, or a Canadian resident on the Akwesasne reserve, with a Certificate of Indian Status card or a TCRD; or a band or band council of an Ontario reserve. The purchase must be for the person's exclusive personal use, or the band's exclusive use.
• Status card: check that the photo matches. Record the date, the customer's name, the card number, the band registry number and a brief description of the goods, and keep the record for audit. Band cards and Métis cards are not accepted.
• TCRD: check government photo ID that matches the name on the document, and the Indian Registrar's raised seal. A photocopy is not accepted.
• What qualifies: check each item against the Ontario page. Purchases that do not qualify include restaurant food (except take-out meals), fuel, alcohol, tobacco, real property, hotel accommodation, parking, and anything the buyer can claim input tax credits on, such as a business purchase.

You cannot give the credit online, or in any sale where you cannot check the card. The same applies to goods imported by mail or courier. Charge the full HST. The customer then applies to the Ministry of Finance within 4 years of paying the tax, with a Receipt Listing form and the receipts the Ministry asks for. A receipt showing GST only does not qualify.

Which line of the GST/HST return do sales to a First Nations organization or status customer go on?

For an Ontario point-of-sale sale, report the full HST, then take back the credit. On the regular method, the CRA's return instructions say the HST collected or collectible must be included on line 103 at the full 13% rate, and the amount credited at the point of sale goes on line 111. If you file on paper, send Form GST189 with reason code 23 and name, in the "Rebate claimed" section, the reporting period in which the credits were offset on line 111. If you file electronically, file the rebate application electronically with your return. Apply within 4 years after you credited the customer; a later application carries a penalty equal to the credit (Credit for Provincial Relief (HST) Regulations, s. 4(2)). The sale itself is also part of the revenue on line 101.

A sale with no tax charged, such as a delivery to a reserve, adds no tax to line 103. Its revenue belongs in the total on line 101, which the CRA says includes "zero-rated and exempt supplies". If you file with lines 90 and 91, the instructions do not say which takes a relieved sale; ask the CRA. Keep these sales identifiable in your records by delivery place and proof. Under the Quick Method, the instructions tell you to leave certain supplies to individuals registered under the Indian Act out of line 101; see the Quick Method guide. For the rest of the return, see filing GST/HST and input tax credits.

Do relieved sales count toward the registration limit, and can I claim input tax credits?

Yes. Sales relieved when made to an eligible buyer still count toward the $30,000 registration limit (a public service body has a higher one), and you may claim input tax credits for GST/HST paid on purchases related to your commercial activities (CRA; B-039). For when the limit is tested and how to register, see when to register for GST/HST.

What if I charged tax I should not have, or a customer has no proof?

Tax charged on a relieved sale can be corrected by the seller or recovered by the buyer. Tax not charged on a sale you cannot support can fall back on the seller.

• You charged tax and the sale was relieved. If the tax is charged but unpaid, adjust it within 2 years after charging it. If you collected it, refund or credit it within 2 years after collection (Excise Tax Act s. 232). Issue a credit note unless the buyer first issues a compliant debit note. The CRA's rebate guide lets a buyer ask the supplier for a refund or credit instead of applying for a rebate (RC4033). See correcting a filed GST/HST return and charged the wrong rate.
• The buyer already paid it. An eligible buyer can claim a general rebate on Form GST189, reason code 1A, within 2 years of paying (section 261; CRA). If the sale was relieved under the Indian Act (for example, a delivery to a reserve) but the full HST was charged, the buyer recovers it through this CRA rebate. The Ministry of Finance route is only for the provincial part of an off-reserve purchase that was not credited at the till (see the Ontario section).
• You did not charge tax and cannot show proof. A supplier must collect the tax on a taxable supply (section 221), and tax that became collectible counts in net tax whether or not it was collected (section 225). The tax can therefore become yours to pay; if you are a corporation that fails to remit it, the directors can be jointly liable (section 323). For phone and online sales, B-039 lets the buyer send the status card copy or certificate afterward. For an in-person sale, the CRA does not say whether proof gathered later is accepted; ask the CRA before relying on it. For paying it and billing the customer, see registered but did not charge GST/HST.

See also GST/HST reviews and audits.

I am a self-employed contractor with Indian status working on a reserve: does my own charging change?

No. Having Indian status does not exempt your sales or your registration; the relief covers what a status buyer pays, not what a status-owned business collects. A business owned by a status person or a band must register once its worldwide taxable sales pass $30,000 in four consecutive calendar quarters or in a single quarter, counting relieved sales; a public service body has a higher limit. Once registered, it collects and remits tax on its sales like any other business, except on sales to status customers, bands and band-empowered entities that qualify for relief (B-039).

A customer who is not registered under the Indian Act is taxable even when the work is on a reserve. A sole proprietorship or partnership owned by status Indians gets the same relief on its purchases as a status individual (B-039). B-039 treats a corporation as a separate person that would not usually qualify, unless it is a band-empowered entity buying for band management; ask the CRA before treating a status-owned corporation as relieved. The business can recover GST/HST paid on eligible off-reserve business purchases through input tax credits. Income tax for a status individual is a separate question and is not covered here.

Do PST and QST follow the same rules?

Relief from GST/HST does not settle PST or QST. Each province sets its own rules for those taxes, and this guide covers only federal GST/HST and Ontario's HST credit. In HST provinces other than Ontario, check the province's own rule for the provincial part before charging. For PST by province, see provincial sales tax. For Québec sales, see doing business in Québec. For which tax goes on an invoice in each province, see charging GST/HST, PST and QST by province.

Example

These examples are illustrative and use Canadian dollars.

Materials delivered to a band office

A Saskatoon contractor delivers (or has a carrier it hired deliver) C$10,000 of materials to a band office on a reserve. It holds the band's signed certificate and a delivery receipt, and charges no GST. If either document is missing, the sale is exposed to GST at 5%, which is C$500. Saskatchewan's provincial tax is a separate question.

An appliance in Ontario: in the shop and online

A GST/HST-registered Sarnia retailer, off the reserve, using the regular method, sells a C$1,000 appliance for personal use to an Ontario-resident customer who shows a valid status card. The retailer checks the photo, records the date, name, card number, band registry number and a description of the goods, and, giving the optional Ontario credit, charges the 5% federal part, C$50. It credits the 8% provincial part, C$80. The return shows the full 13% HST, C$130, on line 103 and the C$80 credit on line 111 (reason code 23). The C$1,000 is part of the revenue on line 101.

The same appliance (same customer, same personal use) ordered online and shipped off the reserve gets no credit, so the retailer charges the full 13%, C$130, and the customer may claim the C$80 Ontario part from the Ministry of Finance. If the retailer instead delivers it to the reserve, the delivery rule may apply: if the customer is registered under the Indian Act and the proof above is on file, the sale is relieved of all HST.

A repair on the reserve and in the shop

A repair business fixes a status customer's equipment at the customer's home on the reserve, records the status number on the invoice, and charges no GST. The same repair done partly in its off-reserve shop is taxable, as in the CRA's own computer repair example.

Different for you?

• You sell regularly to bands or status customers, deliver both on and off a reserve, or the CRA has asked for proof: past sales may lack documents or have been reported the wrong way. Sorting past sales by delivery place and proof, and setting up the tax code for relieved sales, is bookkeeping work; see also GST/HST reviews and audits.
• You charged tax on sales that should have been relieved, or skipped it without proof: see correcting a filed return and charged the wrong rate, with bookkeeping help to sort the affected sales.
• You use the Quick Method: see the Quick Method guide.
• Your business is owned by a status person or a band, or is a corporation owned by a status person: see when to register for GST/HST; the corporation case needs bookkeeping help and a check with the CRA before you rely on relief.
• You need a tax code for relieved sales in your books: see exempt, zero-rated and out-of-scope.
• The customer is in a self-governing or Yukon First Nation, or the reserve has its own First Nations Goods and Services Tax: the CRA publishes separate rules on its First Nations page.