US projects for Ontario design studios: who taxes the fee, the furniture, the install

The design fee: no US federal tax without a permanent establishment

Concept work, drawings, and specification packages produced in your Ontario studio for a US client are business profits of a Canadian business. Under Article VII of the Canada–US treaty, the US cannot tax those profits unless you operate through a US permanent establishment — a fixed place of business there, or too many working days on the ground on one project. When the client's accounts-payable team asks for a W-9, send Form W-8BEN-E instead (W-8BEN if you bill personally): it certifies foreign status and stops a cautious AP system from holding back 30 percent it never needed to.

The Canadian side is friendlier than most studios expect. Design fees for property situated in the US generally leave the invoice HST-free, and the studio keeps its input tax credits on the costs underneath. The fees arrive in USD, so each invoice books at the exchange rate when earned and the difference at collection is FX gain or loss — mechanics our interior designer bookkeeping service handles by default.

State sales tax ignores the treaty — and New York taxes design itself

Tax treaties bind the IRS, not the states. New York taxes interior decorating and design services as a category: an out-of-state designer who delivers services, plans, or renderings in New York State is expected to register and collect sales tax on the design fee itself, not just on goods. Most other states leave the fee alone — but nearly every state taxes the furniture. Resell FF&E to your client at a markup and you are a retailer wherever the goods land: that can mean a seller's permit in that state, resale certificates to your trade vendors, and tax collected on your marked-up price, delivery included.

There is a clean way to shrink the footprint: for one-off US projects, shift to a design-fee-only model and have the client purchase goods directly against your specifications. You give up the procurement markup on that job, but you also give up retailer status in a state you may never work in again — often the right trade.

USD procurement: the markup is simple, the bookkeeping is not

Procurement is a second business inside the studio with its own tax logic. Client deposits held against orders are liabilities until goods ship, vendor deposits sit as USD prepaids, and the exchange rate moves between the day you quote, the day you pay, and the day the client settles. The margin you actually earned is only visible when all three legs are booked at their own rates — one blended rate at year-end turns FX noise into fake project profit.

Routing decides the border cost. Goods a US vendor ships straight to a US project never touch Canada: no Canadian customs entry, no GST at the border. Goods imported into Ontario for staging or workroom finishing and then re-exported cross the border twice — duty and border taxes paid on the way in can often be recovered, but only when the paperwork is planned before the shipment, not reconstructed after.

Install weeks: TN status and the day count that matters

Interior designer is a USMCA (TN) profession — a bachelor's degree, or a post-secondary diploma plus three years of experience, supports legal working entry for site and install weeks. That solves immigration; the treaty runs its own meter. Providing services in the US for 183 days or more in any twelve-month period on the same or a connected project creates a services permanent establishment, and with it US tax on the profits. One penthouse rarely gets close; a designer commuting monthly to a multi-phase hotel job can. We keep a US day log per project, and for studios with steady US billings we file a protective US return so the right to deductions is preserved if the IRS ever takes a different view.

Source: New York State Department of Taxation and Finance — Tax Bulletin ST-400, Interior Decorating and Design Services.