Sales taxes in Canada are getting simpler but many merchants are still caught off guard. Thankfully the Canadian sales tax regime is simpler than in the US, but it still needs planning.GST/HST
The GST is a federal tax. As a Canadian merchant, you are obligated to collect GST/HST for any taxable sale made in Canada.
So yes, even if you are in Alberta, you need to collect 13% HST for sales shipped to Ontario. Merchants also need to stay informed about what is happening in other jurisdictions. Recently BC dropped out of the HST program and re-introduced 5% GST & 7% PST. At the same time, PEI joined the HST regime.Provincial Sales Taxes
Some provinces continue to have their own taxes. Traditionally Canadian eCommerce merchants have not been obligated to collect provincial sales taxes unless they have a physical location in the province, but during the recent changes we made a few disturbing discoveries.BC PST:
According to a provincial tax bulletin
You are required to register with the ministry if you are located outside of B.C., but within Canada, and in the ordinary course of your business do all of the following in relation to taxable goods.
- Sell taxable goods to customers in B.C.
- Accept purchase orders (including by telephone, mail, email or Internet) for taxable goods from customers located in B.C.
- Deliver taxable goods to a location in B.C. Delivery into B.C. includes goods that you ship physically or electronically, even if you deliver the goods through a third party, such as a courier.
- Solicit persons in B.C. (through advertising or other means, including mail, email, fax, newspaper or the Internet) for orders to purchase taxable goods.
So what do they mean by "solicit"? On page 4 they offer some clarification:Please note: If you have only a website that is accessible from anywhere in the world, which does not target B.C., you are not soliciting sales in B.C. However, if you have a website and also solicit sales in B.C. by other means, such as through targeted internet advertisements, promotional flyers or newspaper advertisements, you are soliciting sales in the province.
So in our interpretation, if you are based in Ontario but have customes in BC that subscribe to your promotional emails, then you must register and are responsible for collecting PST.
Manitoba RST: We also found something similar in Manitoba
.Out-of-province businesses that sell/lease taxable goods to Manitoba purchasers are required to be registered as a vendor under the Act and to collect the RST if all of the following circumstances exist:
- The seller solicits the order for the sale in Manitoba, directly or through an agent, by advertising or any other means, e.g. in person, by telephone, mail, e-mail, fax, posters, television or newspaper advertisement targeted towards Manitoba customers,
- The seller accepts orders originating in Manitoba to purchase tangible personal property. The order can be originated by telephone, Internet, e-mail, fax, letter or any other means from a location in Manitoba to the seller or agent located in or out of Manitoba,
- The goods are acquired for consumption or use in Manitoba, i.e. not for resale, and
- The seller causes the goods to be delivered in Manitoba, i.e., delivered by the seller, or shipped by the seller by common carrier, whether or not the goods are shipped at a specified cost to the customer.
The Manitoba regulations seem to apply to merchants selling over $10,000 year into Manitoba
Small businesses with annual taxable sales under $10,000 are not required to register and collect RST. These businesses are allowed to pay RST on their purchases and not collect RST on the selling price of their goods and services. These businesses must indicate on the sales invoice that RST is included in the price (RST must not be itemized on the invoice).
We recommend that all Canadian eCommerce merchants check with an accountant familiar with eCommerce and taxation. An ounce of prevention is worth a pound of cure.