Canada imposes both federal and provincial sales taxes, which are crucial for Canadian sellers using our services to navigate the tax regime in order to avoid penalties and ensure smooth operations.
Since we are dropshipping suppliers and deal with you, our trade customer (B2B), and not the end customer, this guide is based on where you are based as opposed to where the product is shipped to the end customer. Further, this is solely relevant to our Canadian customers.
Overview of Canadian Sales Taxes
Canada’s tax system includes multiple layers of taxation:
- GST (Goods and Services Tax): 5% federal tax applicable across all provinces.
- HST (Harmonized Sales Tax): Combined federal and provincial tax, ranging from 13% to 15%, applicable in certain provinces.
- QST (Quebec Sales Tax):975% provincial tax specific to Quebec.
- PST (Provincial Sales Tax): Varies by province, ranging from 6% to 7%.
- RST (Retail Sales Tax): 8% in Manitoba.
Provincial Tax Details
- Alberta
- GST: 5%
- No provincial sales tax (PST).
- British Columbia (BC)
- GST: 5%
- PST: 7%
- Manitoba
- GST: 5%
- RST: 8%
- New Brunswick
- HST: 15% (5% GST + 10% PST)
- Newfoundland and Labrador
- HST: 15% (5% GST + 10% PST)
- Northwest Territories
- GST: 5%
- No provincial sales tax (PST).
- Nova Scotia
- HST: 15% (5% GST + 10% PST)
- Nunavut
- GST: 5%
- No provincial sales tax (PST).
- Ontario
- HST: 13% (5% GST + 8% PST)
- Prince Edward Island
- HST: 15% (5% GST + 10% PST)
- Quebec
- GST: 5%
- QST:975%
- Saskatchewan
- GST: 5%
- PST: 6%
- Yukon
- GST: 5%
- No provincial sales tax (PST).
Criteria for Charging Canadian Sales Tax
Sellers must charge GST/HST if they meet the following criteria:
- Conduct Business in Canada: This involves regularly and continuously selling to Canadian customers, utilizing Canadian resources such as warehouses, bank accounts, or advertising.
- Sell Taxable Supplies: Most goods and services sold online fall under taxable supplies.
- Exceed the Small Supplier Threshold: Annual sales in Canada surpass $30,000 CAD.
Registration and Compliance
- Business Number (BN): Sellers must register for a BN with the Canada Revenue Agency (CRA).
- Sales Tax Returns: Filing frequency depends on sales volume:
- Annual for sales ≤ $1.5M
- Quarterly for sales $1.5M to $6M
- Monthly for sales > $6M
Provincial Registration
In addition to federal requirements, sellers must register and file returns with each province where they have a significant presence or solicit customers, this is akin to the US “nexus” system. Specific provincial requirements include:
- British Columbia (PST): Registration required if soliciting sales or holding inventory in BC.
- Manitoba (RST): Registration required for sellers with significant presence.
- Quebec (QST): Mandatory registration for sellers with over $30,000 CAD in annual sales.
- Saskatchewan (PST): Registration required if soliciting sales or holding inventory in Saskatchewan.
Additional Considerations
- Accounting Software: Tools like QuickBooks Online and Xero can simplify sales tax tracking and compliance.
- S.-Canada Tax Treaty: Does not impact sales tax obligations.
- Record Keeping: Sellers must maintain accurate sales records for at least six years for audit purposes.
Resources for Further Information
To ensure comprehensive compliance, sellers should consult additional resources such as:
- Avalara: Provides detailed guides and tools for managing international sales tax obligations.
- Canada Revenue Agency (CRA): Offers official guidelines and resources for GST/HST and provincial taxes.
- Provincial Tax Authorities: Each province’s tax authority provides specific rules and registration requirements.
Conclusion
Navigating Canadian sales tax obligations is essential for Canadian e-commerce sellers working with us. Understanding federal and provincial tax requirements, registering appropriately, and maintaining compliance through accurate record-keeping and reliable accounting software will help ensure successful business operations in Canada.
