Drop-shipment rules

A drop-shipment generally happens where a non-resident who is not registered for GST/HST acquires goods from a registrant in Canada and tells the registrant to deliver the goods to another person in Canada.

A drop-shipment also occurs when an unregistered non-resident contracts with a registrant in Canada to have certain commercial services performed on goods, and the registrant causes the goods to be delivered to another person in Canada or to a non-resident person for export. For information, see Goods subsequently exported.

The drop-shipment rules generally relieve the non-resident (the supplier) who is not registered for GST/HST to pay tax.

An unregistered non-resident can take advantage of the drop-shipment rules where a GST/HST registrant sells goods to the unregistered non-resident or does commercial services-manufacturing, processing, inspecting, testing, repair, maintenance, or storage, on goods owned by the unregistered non-resident and then delivers them to a third party. The third party may be a customer of the non-resident or another resident who is taking possession of the goods for the purpose of performing additional work on them.

For more information, see the rules of drop-shipments to registered persons or drop-shipments to unregistered persons.

Forms and publications

• Guide RC4027, Doing Business in Canada-GST/HST Information for Non-Residents
• GST/HST Memoranda Series Chapter 3-3-1, Drop-shipments