How to Invoice as a Contractor in Canada: GST/HST, What Must Be on It, and Getting Paid

A contractor's invoice in Canada has two readers: the client, who has to pay it, and the Canada Revenue Agency, which has to accept it. Most invoices are written for the first and not the second, which is fine until the audit or the client's accountant asks for your GST number. Here is what has to be on it, what the tax line looks like in each province, and how to get it paid.

First: are you charging GST/HST at all?

You must register for a GST/HST account once your taxable sales pass $30,000 in any four consecutive calendar quarters. Below that you are a small supplier: you may register voluntarily, and most contractors do, because registering is what lets you claim back the tax you pay on materials, tools and the truck as input tax credits. A contractor who buys $60,000 of materials a year and is not registered is leaving several thousand dollars of HST on the counter at the supplier.

Once registered you charge the tax on every taxable sale, file returns (annually, quarterly or monthly depending on volume), and remit the difference between what you collected and what you paid. Your business number with the RT0001 suffix is your GST/HST number, and it goes on the invoice.

The tax line, province by province

Charge the rate for the province where the work is done, not where your office is. One line for HST provinces, two lines where the province has its own tax.

Two things the table does not settle. In the PST provinces, what the provincial tax applies to on a construction contract — materials, labour, the whole invoice — depends on the province's own rules for real-property contracts, and it is worth an hour with the provincial bulletin or your accountant before your first BC or Saskatchewan job. And the rates above are the published base rates; some are only a budget away from changing.

What the CRA needs to see on it

The CRA's requirements scale with the amount of the invoice, because your client needs enough on the document to claim their own input tax credits if they are a business. The long-standing table:

The practical rule is simpler: put all of it on every invoice. A residential client does not need your GST number to pay you, but their accountant does if it is a rental property, and an invoice that already carries everything never has to be reissued. The CRA has revised these thresholds; check its current page.

Everything else that belongs on it

• A number in a sequence, with no gaps and no reuse. INV-2026-014 tells an auditor and a bookkeeper the same thing. If you void one, keep it and mark it void.
• The estimate or contract it comes from, by number. On a progress invoice, the stage — Deposit, stage 1 of 3 — and the contract value it is a share of.
• Line items with quantities, units and rates for anything the client agreed to line by line; a lump sum for a stage is fine when the estimate behind it has the detail.
• The subtotal before tax, the tax lines, the total, and where a holdback applies, the holdback retained and the net amount due. Tax applies to the full value of the work; holdback is a deferral of payment, not a reduction of the sale.
• Payments already received and the balance due, so a client who paid a deposit sees where it went.
• The due date and the terms. Due on receipt or Net 15, written out. In Ontario an invoice with no due date will be read as due when received; say what you mean.
• How to pay: the e-Transfer address, a card link, who to make a cheque to. The invoice that explains how to pay gets paid first.

Interest on late payment

You can charge interest on an overdue invoice only if the contract or the invoice says so before the client agrees to it — and in Canada the rate has to be written as an annual rate. The federal Interest Act caps interest at 5 percent per year wherever the rate is not expressed per annum, so 1.5 percent per month on its own is worth 5 percent a year in a dispute. Write it as 18 percent per annum (1.5 percent per month) on amounts outstanding after the due date. Then decide whether you will actually charge it; most residential contractors use it as a reason to call, not a line item.

Holdback

Under Ontario's Construction Act the owner holds back 10 percent of the value of the work until the lien period after completion has run; other provinces have their own lien legislation with their own percentages and periods. On the invoice, show the full value, the holdback retained, and the net due, and bill the holdback release as its own invoice when the period ends. Deposits, draws and holdback covers the mechanics.

Getting paid: the three ways it actually happens

Cash is legal and taxable. A cash payment gets a receipt and goes through the books like every other payment; the contractor who offers a discount for cash is offering to commit a tax offence on the client's behalf, and consumer guides tell homeowners to walk away from it.

Records

The CRA requires books and records — invoices, receipts, bank statements — to be kept for six years from the end of the tax year they relate to. Keep the invoice, the payment record and the receipts for the materials on the same job together; that is also what job costing needs, so the two habits are one habit.

A worked example

A bathroom in Windsor, Ontario, contract value $17,576 before tax with a 50 / 50 payment schedule and no holdback. The deposit invoice reads:

With the GST/HST number, the client's name and address, the description and the terms all on the document, it satisfies every row of the CRA table without anyone thinking about it. The completion invoice repeats the format for the second 50 percent, shows the deposit received, and the two add to the contract value plus tax.

Where Estiquik fits

An Estiquik invoice is built from the estimate with the province's tax line filled in — HST as one line, GST plus PST or QST as two — your business number on it, a sequential number, the estimate reference, the stage on a progress invoice, the payments received and the balance due. It emails with a Pay by card button through your own Stripe account, records e-Transfers and cheques against the balance, and on Pro sends the overdue reminder for you. Progress invoicing handles the stages and the holdback release, and every invoice and payment can push to QuickBooks Online for the six-year file. If you would rather start from a spreadsheet, the free contractor invoice template has the HST line and the business-number field already on it.

Questions contractors ask

Do I have to charge GST or HST as a contractor?

Once your taxable sales pass $30,000 in any four consecutive calendar quarters you must register for a GST/HST account and charge it; below that you are a small supplier and may register voluntarily. Registering lets you recover the tax you pay on materials and tools as input tax credits, which is why most contractors register before they have to.

What tax do I put on a renovation invoice?

The rate for the province where the work is done: HST at 13 percent in Ontario, 15 percent in New Brunswick, Newfoundland and Labrador and Prince Edward Island, 14 percent in Nova Scotia; GST at 5 percent in Alberta and the territories; GST plus PST in British Columbia, Saskatchewan and Manitoba; GST plus QST in Quebec. One line for HST, two lines where there are two taxes. Check the current rates with the CRA and the province before relying on them.

What has to be on an invoice for the CRA?

For any amount: your business name, the date, and the total. From $100: your GST/HST number, the tax amount or a statement that it is included, and a description of the work. From $500: the buyer's name and the payment terms as well. Put all of it on every invoice regardless of size and the question never comes up. Check the CRA's current table, which has been revised.

Can I charge interest on a late invoice?

Only if the contract or the invoice states it, and in Canada it must be expressed as an annual rate: the federal Interest Act limits interest not stated per year to 5 percent per annum. Write it as, for example, 18 percent per annum (1.5 percent per month), state when it starts, and apply it to the amount outstanding after the due date.

How long do I keep invoices?

The CRA requires books and records, including invoices, to be kept for six years from the end of the tax year they relate to. A numbered sequence with no gaps is what an auditor looks for first.

Is e-Transfer or card better for getting paid?

E-Transfer costs the contractor nothing and most homeowners have it; the limit per transfer depends on the bank, so a large draw may arrive in pieces or by cheque. Card through your own Stripe account costs Stripe's standard rate — 2.9 percent plus 30 cents in Canada — and gets paid the same night from a phone. Offer both: e-Transfer for the deposit and draws, card for the client who wants to pay now.