September 10 2013 by Sam Naim
While it may seem overwhelming to consider the various kinds of taxes you need to charge when registering your e-commerce company in Canada, we’ve created this post to help you easily break it down. We will review how Canadian taxes apply for online storeowners registering their company in Canada as well as how to calculate taxes on products/services prices and shipping rates.
WHAT TAX SHOULD I CHARGE MY CUSTOMERS ON PRODUCTS OR SERVICES SOLD?
The rule of thumb is that you charge your customer the GST or HST of the province where the shipment is being delivered. One exception applies when the receiver and shipper are in the same province; in this case, you charge the GST and PST. If the province harmonized their taxes, you will charge HST. For example, your company is registered in Ontario and you are shipping from Ontario to Quebec. The only taxes that your customer should pay are the GST, which applies to shipping cost as well. On the other hand, if your company is registered in Quebec and you are shipping to Quebec then you have to charge the GST and PST.
Same idea applies for all Canadian Provinces: Yukon, Northwest Territories, Nunavut, Alberta, Saskatchewan, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador.
There is an exception to the rules above for the following Provinces:
British Columbia (BC)
You are required to register to collect PST if you regularly do ALL of the following:
- Sell taxable goods to customers in BC
- Accept purchase orders for taxable goods from customers located in BC
- Deliver taxable goods to a location in BC
- Solicit persons in BC (through advertising or other means) for orders to purchase taxable goods
You are also required to register to collect PST if you regularly do all of the following:
- Sell taxable software or telecommunication services to customers in BC
- Accept purchase orders for taxable software or telecommunication services from customers located in BC
- Solicit persons in BC (through advertising or other means) for orders to purchase taxable software or telecommunications services
If you sell taxable goods and services to residents of Manitoba, you are required to register under the Retail Sales Tax Act and collect retail sales tax, if ALL of the following apply:
- You solicit sales in Manitoba (via advertising or other means).
- You accept orders originating in Manitoba.
- The taxable goods are for consumption/use in Manitoba — not for resale.
- You cause the taxable goods to be delivered to Manitoba, regardless of who pays for the delivery.
WHERE CAN I FIND THE TAX RATES (GST/HST) IN CANADA?
The GST/HST can be found at the Canada Revenue Agency GST/HST information page. Make sure that you check these rates from time to time, as they do change.
WHAT ABOUT SELLING TO OTHER COUNTRIES?
You’ll be happy to knows that If your customers’ shipping address is outside of Canada then no tax should apply to the product price or shipping rate. Taxes might not be your favorite thing to figure out, but going forward you should be able to determine what taxes a particular customer should be paying with ease. If you are ever in doubt, please refer back to this article or contact our E-commerce Experts.
Important Note: I always recommend that you contact a Chartered Accountant for any Tax or Accounting questions. Also contact the CRA and Provincial Government of the Province you would like to sell to. The Author of this article is not liable for the information provided and cannot guarantee the accuracy of the information presented as Taxes rules keep changing with time and the article might be out of date.