HST Question

Ok, maybe I’m just second guessing everything so close to the deadline this year…but please help me out.

If a sole proprietor is registered for HST, has a commercial location but sells both exempt services and collects HST on sale of products, can they not claim ITCs on the commercial rent even if 70% of revenues is from the exempt services?

Thanks for your help everyone!

Exempt sales still have to be reported on the GST\HST return, FYI

Whether you supply exempt supplies or not does not factor into the eligibility to claim a GST\HST ITC.

Thank you! :slight_smile:

Not sure if this applies to your situation but I have a few links I would like to share:


Exempt supplies – are supplies of property and services that are not subject to the GST/HST. GST/HST registrants generally cannot claim input tax credits to recover the GST/HST paid or payable on property and services acquired to make exempt supplies.


Certain purchases or expenses cannot be claimed as ITCs. Some of these non-qualifying expenses include:

  • Taxable goods and services that are bought or imported to provide exempt goods and services.
    • Exempt goods and services include used residential housing, medical and dental services, educational services, issuing insurance policies, financial services (such as bank fees) legal aid services, most goods and services provided by charities, and other such services);


** For exempt goods and services, you also do not charge or collect GST/HST and you cannot claim Input Tax Credits.1*

In other words, where a GST / HST registrant is involved in making both taxable and exempt (from GST / HST) supplies, the ITC is available only for the consumption or use in making the taxable supplies. An ITC cannot be claimed on taxable supplies related to making exempt supplies.

Another option to get further clarification is to call the HST technical officer phone number
**1-800-959-8287 **
I would ask for a specific reference to the excise tax act.

Whether you supply exempt supplies or not does not factor into the eligibility to claim a GST\HST ITC.

It certainly does. You’d need to do an analysis of the commercial vs. non-commercial supplies and would have to apportion ITCs. See Memorandum 8.1.

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In my case, the business owner has a naturopathic store where she provides exempt services and also sells products that she collects sales tax. My question is if she can claim the ITCs on the commercial rent since it was necessary for her to sell her taxable goods.

Thanks for the replies.

@CGTax provided your answer.

ITC’S would get apportioned, so you are able to claim a percentage of all ITC’s.

I’m not sure of your clients exact classification but be careful to differentiate between exempt supplies and zero-rated supplies. You can still claim ITCs on the latter but not on the former.

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When I was a controller at a private vocational school/ career college the school sold textbooks in addition to its courses. There was a separate storage room for the textbooks. Only the portion of the square footage used for the storage room was used to calculate the ITC on the commercial rent. This would work in your client’s situation.

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Client has am Etsy online store with Large percentage of product being sold outside Canada. The sale is then exempt.

How would ITC’s be affected in this case?

Are the sales exempt or zero rated (not the same thing). ITC’s can’t be claimed against exempt sales, just against zero rated and regular sales.

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Depends on what the ITC’s were for

Some products are exported to US retail customers so therefore would be Zero Rated. ITC’s would be for products & supplies used in the manufacturing of goods for resale.