Imagine a scenario where a business owner purchases a used residential complex and begins running his business in it and for no other purpose. Is the subsequent sale for GST/HST purposes an exempt sale of a residential complex or a taxable sale of commercial property?

For a used house to be exempt it has to meet the definition of a residential complex,  and to meet the definition of a residential complex it has to meet the definition of a residential unit. The definition of a residential unit reads as follows:

or that part thereof that

Where a building or part has been used in a business activity, even if it was zoned residential, the building or part will generally not meet the conditions of the definition or a residential complex because it will not meet any of paragraphs (d) through (g) and therefore cannot qualify as a residential complex unless it is substantially renovated either physically or deemed to be. Where it has been substantially renovated it can return to its status as a residential complex but the subsequent sale will be taxable, whether to another person or as a deemed sale. In other words, be careful to determine the tax status of a building before selling it, or you might receive an unfavourable assessment from the CRA and have to account for the tax.