GST/HST for Contractors
GST/HST for contractors: rates by job location, draws and holdbacks, subcontractors, T5018 slips and missed ITCs.
The short version
- Contractors register for GST/HST once taxable sales pass $30,000 over four consecutive quarters (or in one quarter), and then charge it on labour and materials.
- Construction and renovation work is a service related to real property, so you charge the rate of the province where the property is, not where your business is.
- Progress billings are taxable when invoiced or paid. Tax on a holdback is generally payable when the holdback becomes due (released) or is paid, if earlier.
- You claim input tax credits on materials, equipment, fuel and subcontractors who charge you GST/HST. That's why most contractors are better off registered.
- Construction businesses that pay subcontractors must also file T5018 slips (an income tax rule) for payments of more than $500 a year; see paying subcontractors.
GST/HST for Contractors
Contractors live in GST/HST: it's on every lumber invoice, every sub's bill, every progress draw and every truck repair. Get the setup right and it washes through the business, collected on one side and credited on the other. Get it wrong (charging the wrong province, skipping tax on draws, working for cash) and it lands on you, years later, with interest. Here's what a contractor needs to know.
What to Charge
| Job | Rate |
|---|---|
| Renovation or construction on property in Ontario | 13% HST, wherever your business is |
| Ontario contractor working on a cottage in Quebec | 5% GST plus QST under Quebec's rules (Quebec registration may be needed) |
| Ontario contractor working in Nova Scotia | 14% HST |
| Materials sold and delivered without installation | Rate where delivered |
| Design or consulting not tied to a specific property | Usually the client's address province |
The general rules are on how to charge GST/HST and the rates on rates by province.
Deposits, Progress Draws and Holdbacks
- Up-front payment to start a job: usually a payment toward the price, so taxable when paid or invoiced; see GST/HST on deposits.
- Progress billings: charge GST/HST on each invoice; report it in the period invoiced (or paid, if earlier).
- Holdbacks (the 10% held under provincial construction acts): tax on the holdback generally becomes payable when it's due to be released or when it's paid, if earlier, not when the main invoice is issued.
- Change orders and extras: taxable like the main contract.
Contractor GST/HST set up right?
Describe your jobs, where they are, how you bill and who you sub out to. The SmartFile checks your rates by job location, your timing on draws and holdbacks, your ITCs and whether the quick method pays for you.
Subcontractors
| Your sub | GST/HST on their bill | Your ITC |
|---|---|---|
| Registered | They charge you GST/HST | Yes, with an invoice showing their number |
| Small supplier, not registered | No tax | None |
| Registered but not charging (cash) | Their problem, but a red flag for yours | None; and CRA may question the payment |
Check a sub's GST/HST number on CRA's registry. Whether a regular sub is really an employee is a separate question with bigger consequences; see contractor vs employee.
T5018 Slips
If construction is your main business and you pay subcontractors for construction services, you must report those payments on T5018 slips (and a summary), for each sub paid more than $500 in the year. It's an income tax information return, due six months after your reporting period ends. CRA matches T5018s against the subs' returns, which is how it finds unreported subcontract income.
ITCs Contractors Often Miss
- Tools and equipment, including those over $500 (capital property); see tools and equipment.
- The business share of a truck; see GST/HST on vehicle purchases.
- Dump fees, permits that carry GST/HST, equipment rentals, safety gear, phone and software.
- Materials for jobs where the client never paid; see bad debts.
Quick Method for Contractors?
Usually not a good fit. Contractors buy a lot of materials and subcontracting, which carry GST/HST you can only recover under the regular method. Labour-only trades with low costs are the exception. Run both; see the quick method.
Building and Renovating Homes
If you build or substantially renovate a home and sell it, you're a builder: the sale is taxable and the buyer may claim the new housing rebate. Building on a client's land is a construction service; the client may claim the owner-built rebate. See GST/HST when building a house, substantial renovation rules and GST/HST on home renovations. Ontario builders: OntarioHSTRebates.ca explains the Ontario rebates your buyers will ask about.
The income tax side of contracting is on independent contractor taxes. Back to the GST/HST guide.
Check an invoice before you claim it with the free construction invoice analyzer: GST/HST paperwork, the rate, T5018 and equipment purchases.
Contractor GST/HST Questions
Do contractors charge HST on labour and materials?
Yes, if registered. GST/HST applies to the full contract price, including labour and materials, at the rate of the province where the property is located.
When do I charge GST/HST on a holdback?
Tax on a construction holdback generally becomes payable when the holdback is due to be released or when it is paid, if earlier.
Which rate do I charge for work in another province?
For construction and renovation, the rate of the province where the real property is located.
What is a T5018 slip?
An income tax information slip that construction businesses must file for payments of $500 or more a year to subcontractors for construction services.
Should a contractor use the quick method?
Usually not, because materials and subcontracting carry GST/HST that can only be recovered under the regular method. Labour-only trades with low costs may benefit.
Sources: CRA, RC4022 General Information for GST/HST Registrants; Place-of-supply rules; GST/HST and home construction. Checked October 2026. Holdback timing and T5018 rules are summarized; Quebec QST obligations are not covered.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.