Drop-shipments to registered persons

When a GST/HST registrant transfers physical possession of your goods to a third party (consignee) who is a GST/HST registrant, the consignee must issue a drop-shipment certificate to the registrant in order for tax not to apply to the supply of goods or commercial services from the GST/HST registrant to you.

Drop-shipment certificates ensure that consignees are aware of their potential GST/HST liability when another registrant transfers physical possession of your goods to them. By issuing the certificate, the consignees acknowledge that they are responsible for the GST/HST payable if they do not acquire the goods for consumption, use, or supply exclusively in the course of commercial activities, or if an unregistered person ultimately uses the goods in Canada. For more information, see Drop-shipments to unregistered persons.

We accept blanket drop-shipment certificates. These certificates cover more than one transfer of physical possession of goods from one registrant to another (the consignee).

A valid drop-shipment certificate must contain the following information:

• the consignee's name and Business Number (BN);
• the consignee has taken or will take physical possession of the goods;
• the goods are acquired for the purpose of performing commercial services on them or that they are for the recipient's consumption, use, or supply; and
• the consignee assumes liability to pay or remit any GST/HST that may become payable.

Note
A registrant may become liable to account for tax on an unregistered non-resident's goods upon taking physical possession of those goods. The liability does not come from issuing a drop-shipment certificate. It can only be avoided by not taking physical possession of the goods.

Example
You buy radios from a registered supplier. You instruct the supplier to have the radios delivered to a registered inspector. The inspector provides the supplier with a drop-shipment certificate. The supplier invoices you for the radios, but does not charge GST/HST. You instruct the inspector to deliver the radios to a registered customer. The customer provides the inspector with a drop-shipment certificate. The inspector invoices you for the inspection service, but does not charge GST/HST. You invoice the customer, and as an unregistered non-resident, you do not charge GST/HST.

To learn more how drop-shipment rules apply see the following pages:

• Transfer of goods to a carrier or warehouse
• Goods kept by registered suppliers
• Goods subsequently exported
• Conditional sales contracts and sale-leaseback arrangements
• When the drop-shipment rules do not apply

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