GST/HST Info Sheet GI-011
May 2025

This version replaces the one dated February 2005. This info sheet has been updated to provide examples and update the information, including the GST/HST rates.

Except as otherwise noted, all statutory references in this publication are to the provisions of the Excise Tax Act (ETA). The information in this publication does not replace the law found in the ETA and its regulations.

If this information does not completely address your particular situation, you may wish to refer to the ETA or relevant regulation, or call GST/HST Rulings at 1‑800‑959‑8287 for additional information. If you require certainty with respect to any particular GST/HST matter, you may request a ruling. GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, explains how to obtain a ruling or an interpretation and lists the GST/HST rulings centres.

If you are located in Quebec and wish to request a ruling related to the GST/HST, please call Revenu Québec at 1‑800‑567‑4692. You may also visit the Revenu Québec website at revenuquebec.ca to obtain general information.

For listed financial institutions that are selected listed financial institutions (SLFIs) for GST/HST or Quebec sales tax (QST) purposes or both, whether or not they are located in Quebec, the CRA administers the GST/HST and the QST. If you wish to make a technical GST/HST or QST enquiry related to SLFIs, please call 1‑855‑666‑5166.

GST/HST rates

Reference in this publication is made to supplies that are subject to the GST or the HST. The GST/HST rates are those that were in effect at the time of publishing. For the list of all applicable GST/HST rates (current and historic), go to GST/HST calculator (and rates).

If you are uncertain as to whether a supply is made in a participating province, refer to GST/HST Memorandum 3-3-2, Place of Supply in a Province – Overview.

Meaning of significant terms

Commercial activity means any business or adventure or concern in the nature of trade carried on by a person, but does not include:

• the making of exempt supplies
• any business or adventure or concern in the nature of trade carried on without a reasonable expectation of profit by an individual, a personal trust, or a partnership where all the members are individuals

Commercial activity also includes a supply of real property, other than an exempt supply, made by any person, whether or not there is a reasonable expectation of profit, and anything done in the course of making the supply or in connection with the making of the supply.

Consumer means a particular individual who acquires or imports property or services for personal consumption, use, or enjoyment or the personal consumption, use, or enjoyment of another individual at the particular individual's expense. It does not include individuals who acquire or import property or services for their commercial activity or to make an exempt supply.

Exempt means not subject to the GST/HST.

Input tax credit means a credit that GST/HST registrants can claim to recover the GST/HST paid or payable for property or services they acquired, imported into Canada, or brought into a participating province for consumption, use, or supply in the course of their commercial activities.

Registrant means a person that is registered or required to be registered for the GST/HST, but generally excludes a person that is registered or required to be registered under special rules applicable to digital economy businesses unless that person registered under those special rules begins carrying on business in Canada, requiring them to register under the regular rules that apply to most persons.

Zero-rated means subject to the GST/HST at the rate of 0%.

Background

Water haulers sell and deliver water in bulk, typically to households and businesses in rural and other isolated areas where there is no municipal water system and where drilling a well is not possible. Such supplies of unbottled water, whether drinking water or non-potable water, and related delivery services are generally exempt from the GST/HST when certain conditions are met.

Water haulers that use or consume unbottled water in the course of making supplies of services, however, are not making exempt supplies of unbottled water.

Water haulers that make exempt supplies of unbottled water and related delivery services are generally not entitled to claim input tax credits (ITCs) to recover the GST/HST paid or payable on purchases and expenses incurred in making these exempt supplies.

Supplying unbottled water is considered to be a standard municipal service. As such, a water hauler can request designation as a municipality to claim a public service bodies' (PSB) rebate at the municipal rate to recover the GST/HST paid or payable on purchases and expenses incurred in making these exempt supplies. For information on applying for a municipal designation, refer to the "Applying for a municipal designation" section in this info sheet. This designation applies only to exempt supplies of unbottled water and related delivery services specified in the designation.

GST/HST exemption for a supply of unbottled water or related delivery service

A supply of unbottled water is exempt from the GST/HST when both of the following apply:

• the supply of unbottled water is made by a person (for example, a water hauler) other than a government or by a government designated by the Minister to be a municipality in respect of its exempt supplies of unbottled water
• the unbottled water is not a zero-rated supply or a supply of water dispensed in single servings to consumers through a vending machine or at a permanent establishment of the supplier

The exemption applies to both potable and non-potable water.

In addition, the supply of a service of delivering unbottled water is exempt when the delivery service is supplied by the water hauler that supplies the water and the supply of the water meets the conditions outlined above.

Therefore, a water hauler does not charge or collect the GST/HST on the amount charged for the sale and delivery of its own exempt unbottled water.

The GST/HST exemption for unbottled water applies even if a water hauler sells and delivers water that it acquired without a permit from a public source (that is, a stream, river, or other public source of water) at no charge.

Taxable supplies of water delivery services

Where a permit to extract water from a public source is required, the permit should generally be in the water hauler's own name in order for the supply and delivery of the unbottled water to be exempt from the GST/HST.

If the permit is acquired in the name of the water hauler's customer instead of the water hauler, the water hauler is considered to be making a taxable supply of a delivery or transportation service to the customer. The water hauler is not making an exempt supply of unbottled water since the water hauler's customer has title to the water prior to delivery.

Similarly, where the customer purchases the water from someone other than the water hauler that delivers the water, the water hauler is making a taxable supply of a delivery or transportation service to the customer.

A water hauler must charge and collect the GST/HST on the amount charged for the delivery or transportation service if the water hauler is a GST/HST registrant and the unbottled water it delivers is not its own.

Taxable supplies of unbottled water

Not all supplies of unbottled water are exempt from the GST/HST.

Supplies of water dispensed in a single serving to consumers through a vending machine or at the supplier's permanent establishment are taxable. A water hauler must charge and collect the GST/HST on sales of water in these circumstances if the water hauler is a GST/HST registrant.

Supplies of unbottled water for human consumption made to a consumer, when the water is dispensed to the consumer in a quantity exceeding a single serving (600 millilitres or more) through a vending machine or at a permanent establishment of the supplier are zero-rated.

For more information on taxable (including zero-rated) sales of water, refer to GST/HST Info Sheet GI-022, Application of the GST/HST to Sales of Water.

Taxable supplies of other services

Where a water hauler provides services other than the delivery of its own unbottled water, supplies of these services are generally subject to the GST/HST. Such services include sod watering, compaction, dust control, street washing, and requests to be on standby.

Invoicing

The method of invoicing used by a water hauler in respect of an exempt supply of unbottled water and related delivery service does not change the nature of the supply made by the water hauler. Whether a water hauler invoices based on an hourly rate which incorporates, for example, an amount for the vehicles and labour, or based on the number of loads or kilolitres of water delivered, the sale and related delivery of the water remains exempt from the GST/HST. In addition, the related delivery service does not have to be on the same invoice as the water; both supplies are exempt since they are made by the same supplier.

Registering for the GST/HST

A water hauler that makes taxable supplies must register for the GST/HST if its total revenues from taxable supplies in its last four calendar quarters or in a single calendar quarter, including those of its associates, are more than $30,000. If a water hauler makes taxable supplies that are below the applicable threshold, it may voluntarily register for the GST/HST.

A water hauler that is a GST/HST registrant must charge and collect the GST/HST on its supplies of taxable property and services and may claim ITCs to recover some or all of the GST/HST paid or payable on purchases and expenses used in making these supplies.

Where a water hauler only makes exempt supplies of unbottled water and related delivery services, the water hauler cannot register for the GST/HST.

For more information on registering for the GST/HST, refer to Guide RC4022, General Information for GST/HST Registrants, and GST/HST Memorandum 2-2, Small Suppliers.

Input tax credits

A water hauler that is a GST/HST registrant is generally eligible to claim ITCs to recover the GST/HST paid or payable on taxable property and services to the extent that the property or services are acquired, imported, or brought into a participating province by the registrant for consumption, use, or supply in the course of its commercial activities (that is, for the purpose of making taxable supplies for consideration).

Conversely, a water hauler is generally not eligible to claim an ITC for the GST/HST paid or payable on purchases and expenses to the extent they are used in exempt activities (that is, the supply of unbottled water and related delivery services). A water hauler that makes exempt supplies of unbottled water and related delivery services can request designation as a municipality for purposes of claiming the PSB rebate at the municipal rate for the GST/HST paid or payable on purchases and expenses incurred in making these exempt supplies. For more information, refer to the "Claiming a PSB rebate" section in this info sheet.

If a water hauler that is a GST/HST registrant makes both exempt supplies (for example, unbottled water and related delivery services) and taxable supplies (for example, road spraying and dust control services), it may be eligible to claim an ITC for a portion of the GST/HST paid or payable on the property or services used in both the taxable and exempt activities, such as vehicle maintenance, utilities, office supplies, and other overhead costs.

To claim an ITC, the water hauler must allocate the GST/HST paid or payable on purchases and expenses between its taxable and exempt activities. The portion allocated to commercial (or taxable) activities may generally be claimed as an ITC. The method of determining the extent to which a property or a service is for use in a water hauler's commercial activities must be fair and reasonable and used consistently throughout its fiscal year.

Different rules for claiming ITCs apply to services and non-capital property, capital personal property, and capital real property. A registrant must use the appropriate rules to calculate the ITC available on the purchase of each property or service.

Services and non-capital property

In the case of operating expenses, if a water hauler purchases non-capital property or a service (for example, office supplies, maintenance services, utilities) that is, or is intended to be, consumed, used, or supplied more than 10% but less than 90% in its commercial activities, the water hauler may claim an ITC to the extent the property or service is consumed, used, or supplied in commercial activities.

If the property or service is, or is intended to be consumed, used, or supplied 90% or more in commercial activities, the water hauler may claim an ITC for the full amount of the GST/HST paid or payable on the property or service. A water hauler is not eligible to claim an ITC where the property or service is, or is intended to be, consumed, used, or supplied 10% or less in commercial activities.

Capital personal property

In the case of capital personal property, such as trailers or office furniture, a water hauler may claim an ITC only if the capital personal property is for use primarily (more than 50%) in its commercial activities. In such a case, the water hauler may claim a full ITC for the GST/HST paid or payable on the capital personal property.

If the capital personal property is for use 50% or less in its commercial activities, the water hauler cannot claim an ITC.

Capital real property

The rule for claiming ITCs on the purchase of capital real property varies depending on whether a water hauler is a corporation or a partnership, or the water hauler is an individual.

If a water hauler is a corporation or a partnership, the general rule for claiming ITCs on the purchase of, and on any later improvements made to, capital real property is based on the intended use of the property in commercial activities. If the intended use of the property in commercial activities is more than 10% and less than 90%, the water hauler can claim an ITC based on the percentage of intended use in the commercial activities. However, if the intended use of the property in commercial activities is 90% or more, the water hauler can claim an ITC equal to 100% of the GST/HST paid or payable on the purchase of, and on any later improvements made to, the property. If the intended use is 10% or less in commercial activities, the water hauler generally cannot claim an ITC.

A water hauler who is an individual must follow the same rules as corporations and partnerships for claiming an ITC on the purchase of real property.

However, there is one important difference. An individual cannot claim an ITC for the GST/HST paid or payable on the purchase of the property if the individual intends to use the property primarily (more than 50%) for their or a relative's personal use and enjoyment, either individually or in combination.

Applying for a municipal designation

A water hauler that makes exempt supplies of unbottled water and related delivery services may apply to be designated as a municipality. Once designated, the water hauler is eligible to claim the PSB rebate at the municipal rate for the GST/HST paid or payable on its purchases and expenses that are intended for use, in whole or in part, in the activities specified in the municipal designation. A water hauler does not have to be registered for the GST/HST to apply for a municipal designation or to obtain a PSB rebate.

The person that supplies the water and related delivery services is the person that is eligible to be designated as a municipality. Water haulers seeking municipal designation for purposes of claiming the PSB rebate at the municipal rate must send in a written request to the Canada Revenue Agency (CRA) and provide applicable supporting documentation. Requests with supporting documentation may be sent electronically using the "Submit documents" service through the Sign in to your CRA account portal. This service is available if the organization or its representative has registered to this portal.

Alternatively, water haulers can mail their request, with supporting documentation, to:

Director
Public Service Bodies and Governments Division
GST/HST Rulings Directorate
Canada Revenue Agency
5th Floor, Tower A, Place de Ville
320 Queen St
Ottawa ON K1A 0L5

If the water hauler is resident in the province of Quebec, the request for municipal designation should be sent to Revenu Québec either via email at designations-municipalite@revenuquebec.ca or to:

Directeur de l'interprétation relative au secteur public
Direction générale de la législation
Revenu Québec
3800, rue de Marly, secteur 5-2-2
Québec QC G1X 4A5

Application made by a third party

Where a third party, such as a tax professional, is acting on behalf of the water hauler to request the municipal designation, a third party authorization letter must be included with the request. The authorization should be specific to the request for a municipal designation and should include the name, address, and telephone number of the third party. If the third party is an individual in a firm, provide both the name of the individual and that of the firm. Other types of CRA authorization forms (for example, Form AUT-01, Authorize a Representative for Offline Access) are not acceptable for the purpose of a municipal designation request.

A water hauler should inform the CRA if it wants to revoke a third party authorization. The request for revocation should contain all of the information provided with the initial request for authorization.

Supporting documentation

In support of a water hauler's request for municipal designation, the following documentation must be included:

• a copy of incorporating documents or other governing documents demonstrating that the person is a supplier of unbottled water
• where a water hauling business is purchased from another water hauler, a copy of the purchase and sale agreement
• a description of the property and services provided (for example, unbottled water and related delivery services) and a description of the municipality and surrounding areas in which the property and services are provided
• a copy of a paid customer invoice showing the supply of unbottled water and, where applicable, the supply of the related delivery service
• a copy of one of the following, as applicable:
  • a purchase invoice for the unbottled water acquired for resale
  • a permit or other document allowing the person to take water from a public source, or any other document such as a letter from a municipality where the water is taken free of charge

If sufficient documentation is not provided, the water hauler or its authorized representative will be contacted and asked to provide additional documentation to support their request. If the additional documentation is not provided within a reasonable length of time, the CRA may send a letter to the water hauler advising that it is closing the file and that the water hauler may reapply for municipal designation when it is able to provide the additional documentation.

The CRA will provide its decision in writing as to whether the water hauler has been granted municipal designation and the effective date of designation, or whether the organization does not meet the eligibility criteria for municipal designation.

Effective date of designation

Generally, a municipal designation is effective the first day of the month in which the designation is approved.

However, the CRA may, on a case-by-case basis, consider an effective date that is prior to the first day of the month in which the designation is approved to the extent that the water hauler would be eligible to claim a PSB rebate or adjust a previously filed PSB rebate claim.

A water hauler that would like a retroactive effective date must provide the reason for the request and ensure that its supporting documentation demonstrates that it met the eligibility requirements for municipal designation during the prior period.

Claiming a PSB rebate

Once a water hauler is designated as a municipality, it is eligible to claim the PSB rebate at the municipal rate to recover the GST and the federal part of the HST paid or payable on non-capital property and services (that is, operating expenses), capital personal property, and capital real property that the water hauler cannot recover through the claiming of ITCs.

If a water hauler is designated as a municipality and is resident in a participating province, it may also be eligible to claim a rebate of a percentage of the provincial part of the HST to the extent that it intended to consume, use, or supply the property or service in the course of its designated activities in the participating province.

The municipal designation does not apply to any other activities that the water hauler may be engaged in. For example, the municipal designation does not apply to a water hauler's provision of taxable supplies like equipment rentals or sod watering, street cleaning, and dust control services.

A designated municipality that is a GST/HST registrant can complete one PSB rebate application for each claim period in which it is eligible for a PSB rebate. A GST/HST registrant's claim period is the same as its reporting period for its GST/HST return (that is, annually, quarterly, or monthly). A GST/HST registrant has up to four years from the due date of its GST/HST return for the claim period in which it made a purchase or incurred an expense to file a PSB rebate application for the claim period.

A designated municipality that is not a GST/HST registrant can complete one PSB rebate application for each claim period in which it is eligible for a PSB rebate. A designated municipality that is not a GST/HST registrant has two claim periods per fiscal year (the first six months and the last six months of its fiscal year). A designated municipality that is not a GST/HST registrant has up to four years from the end of the claim period in which it made a purchase or incurred an expense to file a PSB rebate application for the claim period.

Municipal PSB rebate rates

The municipal PSB rebate rates are as follows:

For detailed information on how to calculate and claim the PSB rebate, refer to Guide RC4034, GST/HST Public Service Bodies' Rebate.

For more information on the municipal PSB rebate, refer to the following:

• Form GST66, Application for GST/HST Public Service Bodies' Rebate and GST Self-Government Refund
• Form RC7066-SCH, Provincial Schedule – GST/HST Public Service Bodies' Rebate
• Guide RC4049, GST/HST Information for Municipalities

Selling or buying a water hauling business

If a water hauler that has been granted a municipal designation sells its water hauling business, the municipal designation does not transfer to the purchaser of the business. The seller must notify the CRA if it ceases making exempt supplies of unbottled water. For more information, refer to the "Cancelling a municipal designation" section in this info sheet.

If the purchaser has previously been designated as a municipality for purposes of the PSB rebate in respect of its exempt supplies of unbottled water, it does not need to reapply for designation. Its existing designation also applies to the newly acquired water hauling business.

If the purchaser is not already designated to be a municipality in respect of its exempt supplies of unbottled water, it may apply for a municipal designation.

Where a corporation that operates a water hauling business has been granted a municipal designation and the corporation's shares are sold, the designation continues to apply to the corporation's exempt water hauling activities. The corporation is not required to apply for a new municipal designation.

Changes in business structure

A water hauler designated to be a municipality must notify the CRA if there are changes to its business structure (for example, a sole proprietorship becomes incorporated, a new organization is created upon the amalgamation or merger of two or more organizations).

For GST/HST purposes, a newly formed organization is generally treated as a separate person from any of the former organizations. As a result, any prior municipal designation does not carry over to the newly formed organization. To be eligible to claim PSB rebates at the municipal rate, the newly formed organization must apply for municipal designation.

Failure to notify the CRA of such changes in business structure could result in delayed rebate payments and, in some cases, reassessments of previously paid rebates.

Cancelling a municipal designation

If there is a change in the water hauler's business structure or the water hauler ceases making exempt supplies of unbottled water, a letter detailing the changes and any supporting documentation of the changes should be sent to the CRA (or Revenu Québec) to assess whether the water hauler continues to meet the eligibility criteria for municipal designation.

For information on where to send the letter and documentation, refer to the "Applying for a municipal designation" section in this info sheet.

Further information