When the driver is employed by a trucking company to drive carrier trucks, the salary and wages paid to this employee are not subject to GST/HST, however they are subject to source deduction, which is payable to CRA under the carrier payroll account.
When a self-employed driver does not use their own truck and does not assume liability for the supply of a freight transportation service, this is considered as providing driving service which is subject to GST/HST when the self-employed driver is a GST/HST registrant and their annual revenue exceeds $30,000 gross limitation. For more details on GST/HST registration please see: http://www.iaccountingservices.com/gsthst.html
Regardless of whether the cargo is being moved within Canada or to the U.S., the service is not zero-rated and is subject to GST/HST. The Canada Revenue Agency has issued an information circular and deemed that the delivery of the “service” itself is considered delivered to the carrier’s office. Assuming the carrier is Canadian, GST/HST does apply to driving a truck to the U.S. and back.
When an owner-operator meets the definition of a carrier, and as an independent contracts to supply international freight transportation services using their own truck and assumes liability to supply a freight transportation service; hence the following international freight transportation services will be zero-rated when the service involve:
- Transportation of goods from a place in Canada to a place outside Canada
- 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.
However, if an owner-operator does not assume liability to supply a freight transportation service, then it is not a carrier for purposes of the GST/HST. Instead, the owner-operator is providing a driving service similar to a self-employed driver and this service is subject to GST/HST when supplied by a GST/HST registrant.
Domestic Freight Services
Most domestic freight transportation services provided in Canada are generally subject to the GST/HST. However, the following freight transportation services supplied in Canada are zero-rated as follows:
- Services that are part of a continuous inbound or outbound international freight movement
- Services that are being supplied to another carrier under an interlining arrangement that are part of a continuous freight movement.
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.
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.
For more information please visit CRA website with the following Guide:
RC4080: GST/HST Information for Freight Carriers
GST/HST Memorandum 28.2: Freight Transportation Services