Canada Revenue Agency
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Tow-truck operators
The service of towing a vehicle from the site of an accident or breakdown is a freight transportation service. Roadside services (for example, car boosting, winching, and unlocking doors) are not freight transportation services since these services do not involve the transportation of goods. If the tow-truck operator provides car boosting or other services before towing a vehicle, the car boosting or other services may be incidental to the freight transportation services.
The interlining rules also apply to the service of towing a vehicle from the site of an accident or breakdown. When self-employed contractors (operators) work for a GST/HST registered tow-truck company, the services provided by the operators to the tow-truck company are zero-rated and the tow-truck company (as the invoicing carrier) is responsible for charging and collecting the GST/HST from the customers.
Note
As a truck owner-operator or tow-truck operator who provides only interline freight transportation services, you do not collect GST/HST from the carrier for those services. In this case, even if you are a small supplier, you would benefit from registering for the GST/HST since you would be able to claim input tax credits for GST/HST you pay or owe on expenses related to your interline services.
Example
XYZ is a GST/HST registrant in the business of providing towing and related roadside services (e.g., car boosting, winching, unlocking doors). It has a number of self-employed contractors (operators) operating tow-trucks for it. These operators are GST/HST registrants. Customers requiring XYZ's services contact XYZ which, in turn, dispatches the operators to the locations. XYZ then invoices the customers for the towing and related roadside services. The operators invoice XYZ for the towing and related roadside services provided to the customers on behalf of XYZ.
In this example, both XYZ and the operators are involved in transporting goods. The towing services provided by XYZ to its customers and by the operators to XYZ qualify as freight transportation services. In addition, XYZ, as the invoicing carrier, is responsible for charging and collecting GST/HST from its customers. Therefore, since the operators are providing freight transportation services on behalf of XYZ and XYZ remains responsible for invoicing the customer, the services provided by the operators to XYZ are zero-rated.
However, roadside services (e.g., car boosting, winching, unlocking doors) provided by XYZ to its customers, and by the operators to XYZ, do not qualify as freight transportation services since these services do not involve the transportation of goods. As a result, these services are not zero-rated and are taxed GST/HST.
