Two invoices can both show no GST/HST charged and still have different tax consequences. Keep "zero-rated" and "exempt" as separate categories in your bookkeeping.
Start with the supply
A zero-rated supply is taxable at 0%. An exempt supply is outside the ordinary tax-charging rules for taxable supplies. For a registered business, purchases used to make zero-rated supplies can support ITCs when the usual conditions are met; purchases used to make exempt supplies generally cannot. CRA's supply-type guidance.
Many basic groceries are zero-rated. Many long-term residential rentals are exempt. Those examples do not decide the status of a particular prepared food, short-term stay or bundled service: the actual product and conditions matter.
For a freelancer selling abroad, the question is whether an export zero-rating provision applies. A US customer's address does not create a general exemption. Calling all foreign sales "exempt" can obscure both registration calculations and eligible purchase taxes.
Make the distinction usable in your records
Imagine a registered business with two service lines. One qualifies for zero-rating; the other is exempt. A shared software bill cannot automatically be treated as entirely related to taxable activity just because the same business pays it. Keep enough information to allocate shared costs appropriately.
Record the reason for the classification beside the product or service, then retain the contract and customer facts supporting it. A spreadsheet code should summarize a decision, not substitute for one.
When reviewing the small-supplier threshold, include zero-rated taxable supplies in the relevant calculation. Do not assume that a zero tax amount means the sale is ignored. Our HST threshold story explains the timing test separately.
Checked October 20, 2026. For foreign clients, continue with services supplied to a US customer.
