US parts in, US warranty money out: cross-border tax for repair shops

Start with the money coming north: who is the warrantor?

When your shop performs warranty or recall-adjacent work and bills a manufacturer, the GST/HST answer depends on one question: is the warrantor a non-resident that is not GST/HST-registered? If yes, the repair service — parts included — is zero-rated under a specific export provision (Schedule VI, Part V, section 13 of the Excise Tax Act). If the warrantor is a Canadian subsidiary or a registered non-resident, you charge tax normally and they recover it. Shops lose money both ways: charging HST an unregistered US warrantor will not pay, or zero-rating an invoice to a registered entity and eating the assessment later.

Reimbursements from US payers usually arrive in USD. They are ordinary revenue converted to Canadian dollars — and when a US payer asks for a W-8BEN-E before releasing funds, that is a routine certification that your company is Canadian, not a sign you owe US tax on work performed in your own bays.

Northbound parts: origin sets the duty, paperwork sets the recovery

A part shipped from a US warehouse is not US-origin unless it was actually made there — and much of the aftermarket is not. CUSMA-originating parts enter duty-free; offshore-made parts pay the tariff rate for their class, and the tariff environment since 2025 has been volatile enough that a supplier switch can change your landed cost mid-quarter. The constant is the 5 percent GST at the border: fully recoverable as an input tax credit, but only when the customs entry names your shop as importer of record rather than a courier's consolidated account. With commercial importers managed through CBSA's CARM system, we reconcile broker statements to the ledger so claimed ITCs match entries CBSA can see.

The same rules follow the big-ticket purchases. A used lift, alignment rack or scan platform bought from a US seller crosses with duty set by its origin and 5 percent GST on the converted value — recoverable, again, only with your shop as importer. The equipment then lands on the books at its full Canadian-dollar landed cost, which becomes the base for capital cost allowance.

Tariff pass-through: surcharges belong on the estimate, with HST on top

When tariffs push parts costs up, most shops add a materials or tariff surcharge rather than reprint their labour rates. Two rules keep that clean. First, a surcharge is part of the price of the repair — HST applies to the full invoice including the surcharge, not just the base amount. Second, on insurance work the surcharge must live in the approved estimate; a tariff line added after approval becomes a fight with the adjuster instead of a cost recovery. We track parts-cost inflation by supplier in the monthly numbers so pricing moves with evidence, not anecdotes.

Core returns: the southbound flow shops forget

Remanufactured parts run on core charges, and the core often goes back to a US remanufacturer. Since the US ended its US$800 de-minimis exemption for commercial shipments in August 2025, those southbound cores need formal customs entries — there is no small-parcel shortcut left. The bookkeeping matters too: core charges are deposits, not parts expense, and a shop that expenses cores overstates cost of goods until the credits come back. Clean core tracking keeps both the customs description and the margin honest.

Where this fits in the whole file

Cross-border flows are one layer of a repair shop's tax picture — the T2, vehicle and equipment purchases, apprentice credits and HST filings sit underneath, with our auto repair shop tax services. For the treaty positions, importer-of-record cleanups and zero-rating reviews described here, the full practice is at cross-border tax services. Boutique firm, cloud-first, fixed fees quoted after a discovery call.

Source: CRA — GST/HST Memorandum 4-5-3, Exports: Services and Intellectual Property.