Do I charge HST to a US client based in California?

Generally no. A service you supply to a non-resident US customer that is not registered for GST/HST and does not consume the service in Canada is a zero-rated supply under Excise Tax Act Schedule VI, Part V, s. 7. You charge 0% HST but you still claim your input tax credits.

Zero-rated is not the same as exempt. Zero-rated means the tax rate is 0% and you keep all input tax credits (ETA s. 169). Exempt means no tax and no ITC recovery. Getting this wrong on your books costs recoverable HST on your Canadian overhead.

Example: an Ontario software consultant bills a California SaaS company US$20,000 for a discovery engagement performed remotely from Mississauga. The service is zero-rated because the recipient is a non-resident, the recipient is not registered for GST/HST, and the service is not primarily consumed in Canada. The invoice shows US$20,000 plus HST at 0%. The consultant still claims full ITCs on their Ontario software subscriptions, laptop, and office rent.

The zero-rating fails if the non-resident is in Canada at the time the service is performed, or if the service is in respect of real property or tangible personal property situated in Canada, or if the service is an advisory service relating to a legal proceeding in Canada (ETA Sch VI Pt V s. 7 exclusions).

Note: Document the customer’s non-resident status and non-registration in your file. On audit CRA asks for proof; a bill-to address alone is not conclusive.

Source: canada.ca — Exports of services

— Bader A. Chowdry, CPA, CA, LPA — Insight Accounting CPA

Disclaimer: Bader A. Chowdry, CPA, CA, LPA is a Licensed Public Accountant regulated by CPA Ontario. Insight Accounting CPA Professional Corporation is a Chartered Professional Accountant firm. This content is general information only and does not constitute professional advice for your specific facts. Confirm current rules and figures with your own advisor before acting.