An online retailer faced a $75,000 GST/HST audit over mismatched input tax credits. We reconciled every transaction and reduced the liability to $3,500.
A Canadian e-commerce business was audited over three years of GST/HST filings, with the CRA proposing a $75,000 reassessment based on mismatched input tax credits and shipping logs. We reconciled all invoices, matched shipping records to place-of-supply rules, and filed structured reconciliations. The reassessment dropped to $3,500.
E-commerce sits across provincial sales tax regimes, marketplace collection rules and inventory held in other jurisdictions.
Registration is mandatory once taxable supplies pass $30,000 over four consecutive calendar quarters. Input tax credits require documentation that scales with invoice size.
Why it bites: Unmatched input tax credits are the first thing disallowed in a sales-tax review, and the assessment covers every period reviewed.
A review is won on documentation created at the time, not on explanations offered afterwards. The CRA asks for the source records behind a figure, and an unsupported claim is simply disallowed.
Why it bites: Most reassessments we reverse are not the result of a wrong position — they are the result of a correct position with no contemporaneous paper trail behind it.
The rate charged follows the customer's province, not the seller's: 13% into Ontario, 15% into New Brunswick, Newfoundland and Labrador and PEI, 14% into Nova Scotia (since 1 April 2025), 5% plus provincial tax elsewhere.
Why it bites: A seller charging its own province's rate nationally is under-collecting on some sales and over-collecting on others, and owes the difference on the under-collected ones.
Every engagement above was priced as a fixed fee agreed before the work started, and paid only once the client had reviewed the result. If any of this looks like your situation, the first step is a free 15-minute call — we will tell you plainly whether there is anything worth doing.
Reviewed by Udit Gupta, Founder and Tax Accountant for the 2025 tax year. This case study is based on a real client engagement handled by Tax Filings Canada; the client's name and identifying details have been changed. Outcomes depend on your own facts.
Sources. CRA — GST/HST for businesses · CRA — GST/HST rates by province · Income Tax Act (Justice Laws Website)
