Invoicing a US customer from Canada: zero-rated exports, the invoice, the currency

For a business in Montréal, Toronto or Vancouver, the customer in Boston is the most ordinary foreign customer there is — same time zone, same language, a currency everyone can read — and the invoice still differs from a domestic one in three ways. The Canadian sales taxes usually come off it, because most exports are zero-rated; it is usually written in US dollars while your books stay in Canadian dollars; and the customer's accounts-payable department may ask for a form before it pays. This page goes through the three, says what the invoice should show so that it explains itself to the CRA, to Revenu Québec and to the customer, and ends with what KRONENWERK does about each and what remains a question for your accountant.

Zero-rated is not "no tax"

Under the Excise Tax Act, most supplies exported from Canada are zero-rated: they are taxable supplies on which the rate is 0 %. The distinction matters in two places. Because the supply is taxable, you keep the right to recover the GST/HST you paid on the costs behind it; and because the rate is zero, the invoice carries a tax line at 0 % rather than no tax line at all, so that anyone reading the document — the customer, an auditor, your own bookkeeper next year — sees that the tax was considered and why it is nil. Québec's QST follows the same logic for exports, so a Québec seller's invoice to a US customer shows GST at 0 % and QST at 0 %, each with the seller's registration number, and nothing else changes about the layout.

The conditions are where the accountant earns their fee. Goods are zero-rated when they are delivered or made available outside Canada, or shipped to a destination outside Canada by you or a carrier you engage, or when the purchaser is not a consumer and exports them itself within a reasonable time, without using them in Canada first — and you must be able to prove the export with the shipping documents. Services supplied to a non-resident are generally zero-rated, with a list of exceptions that includes services rendered to an individual while in Canada, services related to real property or goods situated in Canada, and a handful of others. Intangibles — software licences, subscriptions, designs — supplied to a non-resident who is not registered for the GST/HST are generally zero-rated as well. Whether your supply falls inside the rule, or inside one of the exceptions, is a decision about facts that only you and your adviser have; KRONENWERK records the decision, it does not make it.

What the invoice shows

Everything a domestic invoice shows, in the same tiers by amount — your name, the date, the total, your GST/HST and QST registration numbers, the customer's name, a description and the terms — and, in the tax block, a GST/HST line at 0 % with the reason you state, and a QST line at 0 % for a Québec seller. A short reason on the document ("zero-rated export — goods shipped to the United States", "zero-rated — service supplied to a non-resident") is not required by the regulations but is the single most useful sentence on the page: it tells the customer why no tax appears, and it tells an auditor which provision you relied on. Keep the shipping documents, the customer's address and, for services, the evidence of non-residence with the invoice; the proof is yours to keep, not the customer's.

The customer's side has its own paperwork. A US business paying a foreign supplier will often ask for IRS Form W-8BEN-E before it pays, so that it does not have to withhold tax on the payment. It is a declaration of your foreign status, not a tax filing, and it is normal; have it ready before the first invoice goes out rather than after the first payment stalls. Whether your sales into a particular US state create a sales-tax obligation there — the "economic nexus" rules that many states apply once sales exceed a threshold — is a separate question, outside Canadian tax altogether, and it requires professional confirmation.

Dollars, books and the exchange rate

You may invoice in US dollars, and most customers expect it. Your books, however, are kept in one currency, and for a Canadian company that is the Canadian dollar; every foreign-currency invoice therefore has two values — the amount the customer sees and the amount that enters the ledger — and the difference between the rate on the day of the invoice and the rate on the day the money arrives is a foreign-exchange gain or loss. For the GST/HST return, the CRA requires the tax base to be expressed in Canadian dollars using the exchange rate on the day the tax became payable or another method it accepts consistently; for a zero-rated invoice the tax is nil either way, but the sale itself still enters your return in Canadian dollars.

KRONENWERK keeps the company's books in one base currency and lets the customer's currency be stored on the customer record. An invoice to a US customer is drafted and issued in US dollars, and the ledger carries every line in both the transaction currency and the book currency, so the receivable is followed in dollars the customer owes and in dollars your accountant reports. When the payment lands in a different amount of Canadian dollars than the invoice was booked at, the difference is recorded as the exchange difference it is. The multi-currency guide covers the mechanics.

A worked example

A Montréal design studio delivers a brand identity to a software company in Austin for US$12,000. The customer is a non-resident business; the service is not rendered to an individual in Canada and is not related to Canadian real property; the studio and its accountant conclude the supply is zero-rated. The invoice is issued in US dollars: twelve thousand, GST 0 % with the note "zero-rated — service supplied to a non-resident", QST 0 %, both registration numbers, the customer's legal name, a description of the deliverables and net-30 terms. The books record the receivable at the Canadian-dollar equivalent on the invoice date; when the wire arrives twenty-eight days later at a slightly different rate, the small difference is booked as an exchange gain. The studio's GST/HST return shows the sale in Canadian dollars in the zero-rated line. The customer, before paying, asked for a W-8BEN-E and received one the same afternoon.

How KRONENWERK handles this

SUPPORTED WITH LIMITATIONS Invoices in US dollars with books in Canadian dollars, both values carried on every ledger line; a GST/HST line at 0 % with the reason you state, and a QST line at 0 % for a Québec seller, with both registration numbers; the customer's country and currency on the customer record; exchange differences recorded on payment; the shipping documents and the customer's correspondence filed with the invoice or the transaction. Not done: KRONENWERK does not decide whether a supply is zero-rated, does not produce a W-8BEN-E, does not assess US state sales-tax nexus, and does not file the GST/HST or QST return. See also what a Québec invoice must show and the Canada page.