Serving US clients from a Canadian agency, tax and contract points to check

What to take away

CRA reporting when your invoices cross the border

The Canada Revenue Agency taxes your worldwide income. US source revenue lands on your T2 corporate return, or your T1 if you operate as a sole proprietor. The client's country changes nothing about that.

The US side is where owners guess. Invoicing a US company does not create a US filing obligation. A US federal return becomes necessary when you have a US trade or business, US-source effectively connected income, or US employees.

A Montreal agency translating product documentation for a Boston software firm normally has none of those. The Canada-United States overview and federal supports page is the right starting point for export programmes and trade contacts (Canada-United States: Overview and federal supports - Canada.ca).

Withholding is the trap. US accounts payable systems sometimes treat every non-US payee as a 30% withholding case. The Canada-US tax treaty reduces the rate on business profits to zero in most cases. Send a completed W-8BEN-E to the client, keep a copy with the contract, and the withholding should stop.

A W-9 is a US form for US persons. A Canadian corporation gives a W-8BEN-E instead. If a client insists on a W-9, explain the difference in writing and ask to speak to their tax department. Get a US Employer Identification Number only if a client demands one.

Keep books and records for six years from the end of the last tax year they relate to. File US contracts, purchase orders, invoices and bank statements together, so a question about foreign revenue meets a clean file.

Payroll is separate. A US-based freelance translator is generally a service bought from a non-resident, not US payroll. Hiring a US employee creates US payroll obligations and probably a state registration. Most Canadian agencies contract with US freelancers rather than employing them.

GST/HST on cross-border localization work

Most services you supply to a US business client are zero-rated. Zero-rated means the rate is 0%, not exempt. You report the supply on your return and you claim input tax credits on the Canadian costs of delivering it.

The test is where the client belongs, not where the work happens. A US company with a US address receiving a translated manual from your Montreal team is a zero-rated export. A Canadian subsidiary of a US parent, invoiced in Toronto, is a domestic supply and GST/HST applies at the normal rate.

Confirm which legal entity signs and where that entity is resident, then put the answer in the file. The business taxes page at Canada.ca covers the registration and filing obligations that follow (Business taxes - Canada.ca).

Registered in Ontario, you charge Canadian clients 13%. The Ontario page explains what the tax covers and how it applies to supplies made in the province (Harmonized Sales Tax | ontario.ca). That rate does not touch your US exports, but it does touch your Canadian overhead, and you recover it as input tax credits.

Quebec agencies register separately with Revenu Quebec for QST. Alberta has no provincial sales tax, so a Calgary agency charges 5% GST on domestic supplies and 0% on US exports. British Columbia has PST plus GST. Know which regime you are in before you quote.

Filing is not optional because your sales were exports. You file on the same schedule, reporting zero-rated supplies on the relevant line (How to file - File your GST/HST return - Canada.ca).

Zero-rated does not mean invisible. Your return shows the export sales, and your invoices show your GST/HST number with a note that the supply is zero-rated. US clients ask for that note because their own auditors want it.

If you are still incorporating or forming the partnership, the starting a business page walks through registration, business numbers and the accounts you need (Starting a business - Canada.ca). Do that before your first US invoice.

State law decides the clauses, not the country

There is no single US contract law. Each state sets its own rules on contract formation, implied terms, limitation periods and which clauses a court will enforce. Standard Ontario wording may be unenforceable in California or read differently in New York.

Governing law and venue come first. A contract governed by New York law and heard in New York courts is expensive for a small Canadian agency, even when you are right. Push for Ontario or British Columbia law, or at least arbitration in a neutral city. If the client will not move, price the risk.

Non-compete and non-solicit clauses vary sharply. California is hostile to non-competes for employees, and other states enforce them narrowly. A US client asking you to sign a non-compete covering your other clients is restraining your business, not adding a routine term.

Indemnity is the other state-sensitive area. An uncapped indemnity with no fault requirement can expose you to costs far beyond the contract value. Cap it at fees paid, exclude indirect losses, and require notice and control of any claim.

Limitation periods differ too. A clause shortening the notice period for claims can be enforceable in one state and not another, so do not assume your standard wording travels.

Sales and use tax on services is a state question: most states do not tax professional services, but some tax data processing or information services.

If you deliver a localization platform or a software component alongside translation, check the state's treatment before invoicing.

State privacy and data laws apply to the content you handle. If you translate customer records or marketing data for a US client, the contract should say who is responsible for compliance with the relevant state statute. Do not accept blanket responsibility for laws you cannot audit.

Four clauses worth a real read

Governing law decides which rules apply and where you fight. Payment terms decide whether you get paid. IP decides who owns the translation memory and the translated text. Termination decides how you exit.

On payment, watch net terms, currency, late fees and set-off. Net 60 is common in US enterprise procurement and it is a cash flow problem for a small agency. Ask for net 30, a deposit on large projects, and late interest. Compare what you sign with what happens in practice on contract terms compared.

On IP, the default in most US contracts is work made for hire, which transfers copyright in the final translation to the client. That is usually acceptable. It is not acceptable for your translation memory, glossaries, term bases or proprietary tooling. Carve those out and state that you retain ownership and may reuse them.

On termination, check the notice period, what happens to work in progress, and whether the client can terminate for convenience. If they can, you need a kill fee covering committed work and subcontractor costs. Check whether termination also kills the client's licence to your memory assets.

On confidentiality, check the survival period and whether it covers subcontractors. You use freelance translators, and the client's NDA has to flow down to them. Keep a standard flow-down clause rather than negotiating it each time.

On warranties, resist a blanket promise that the translation is error-free. Offer a correction window instead: the client notifies within a set period and you fix genuine errors at no charge. That is a normal professional standard and it is defensible.

On insurance, US clients often ask for general liability and professional indemnity certificates. Check what your policy actually covers for translation errors and cross-border claims, and do not sign an indemnity you cannot insure.

Currency, invoicing and payment rails

Invoice in the currency you can defend. If the contract is in US dollars, invoice in US dollars and record the exchange rate you used. If you invoice in Canadian dollars, say so and state the rate date. Mixing the two across a project creates reconciliation work on both sides.

Cross-border invoices need fields domestic ones do not:

The payment rail affects cost and speed. Wires are fast and expensive. ACH needs a US bank account. International transfer services and US dollar virtual accounts are common now and cheaper for recurring payments. Pick one, document it in the contract, and print the details on the invoice.

Bank fees are a real cost. Incoming wires can carry correspondent bank charges that reduce what you receive. Decide whether the contract says the client pays fees or you absorb them, then check the actual amounts on your statements. That belongs in your regular review of translation agency client reporting.

Exchange rate movement is a margin issue, not a rounding issue. A three-month project quoted at one rate and paid at another can lose several points of margin. Build a small buffer into US dollar quotes, or take a deposit to lock the rate on the largest part of the fee.

Quoting in Canadian dollars to a US client invites questions. The answer is simple: your costs are in Canadian dollars. Show the rate and the date. A clear translation agency quote template removes most of that friction before procurement gets involved.

Late payment is the norm in US enterprise accounts, not the exception. Set a collections routine: invoice on time, follow up at day 31, escalate at day 45, stop work at day 60 if the contract allows.

Put that escalation in the contract so it is not a surprise. The same discipline applies to winning the work, as covered in our sales and proposal guide.

A pre-signature checklist for US contracts

Run this before you sign. It takes twenty minutes and prevents most of the problems that cost real money later.

Two checks sit outside the contract. Confirm your professional indemnity policy covers cross-border claims, and confirm your bookkeeping tracks US dollar revenue and exchange gains separately. Both are easier before the first invoice than after.

Pricing is the last check. A US contract often brings extra scope: a second review round, US style preferences, terminology work for a second target market.

Price the work so the added scope is covered, and keep the reasoning visible in your quote. Our notes on charging properly for translation agency services cover how to build that into the rate rather than absorbing it.

Common questions

Do I need to charge GST/HST to a US client?

Usually no. Services supplied to a non-resident business client are generally zero-rated, so you charge 0% and still report the sale. Confirm the client's status and address, and keep the evidence on file.

Does a Canadian agency file a US tax return?

Only if you have a US trade or business, US-source effectively connected income, or US employees. Routine translation for US clients from Canada normally does not trigger a US federal return. If you are unsure whether your activity crosses that line, ask a cross-border accountant.

What stops a US client withholding 30% from my invoice?

A completed W-8BEN-E given to the client. The Canada-US treaty generally reduces withholding on business profits to zero, so their tax department can process payment without withholding. Keep a copy with the contract in case the question returns at year end.

Which state law should I accept in a US contract?

The one you can afford to enforce. Ontario or British Columbia law is cheaper for a Canadian agency. If the client insists on their own state, price the added legal risk into the fee, and take advice from a lawyer licensed there before signing anything with an uncapped indemnity.

Who owns the translation memory after a US project?

You do, if the contract says so. Work made for hire transfers the final translation, but memory, glossaries and term bases need an explicit carve-out. Without that sentence, you may be arguing about it later.

Can I invoice a US client in Canadian dollars?

Yes. State the currency, the exchange rate and the rate date on the invoice. Many US clients prefer US dollars, so agree the currency in the contract before the first invoice goes out.