Memorandum 3.3.1: Drop Shipments (GST/HST)

(Canada Revenue Agency)

This memorandum explains the “drop-shipment” rules under the Excise Tax Act governing transactions involving the transfer of goods by a registrant in Canada to another person in Canada on behalf of an unregistered non-resident for purposes of the GST/HST.

It also explains the mechanism of the flow-through of input tax credits for the tax paid by an unregistered non-resident on the importation of goods by the nonresident, and the non-resident rebate for installation services supplied in Canada to a non-resident.

Note: Effective January 1, 2008, the rate of GST is 5% and the rate of the HST is 13%. All references to GST/HST rates of 6% and 14% in this publication should be read as 5% and 13% respectively. For more information please refer to GST/HST Notice 226, GST/HST Rate Reduction in 2008.

This memorandum replaces the version dated February 2001. The revised D-Memo is available here.