Canadian sales tax for U.S. sellers
- Sales and Use Tax
- Jan 30, 2019 | Avalara
Ecommerce sales in Canada continue to rise and are expected to have hit approximately $57 billion (CDN) for 2018. That said, there’s still plenty of room for additional growth, particularly for U.S. sellers.
Approximately half of Canada’s small businesses don’t sell through their websites, and close to half of all online purchases made by Canadians are through foreign retail sites. This means the Canadian market presents an enormous opportunity for ecommerce businesses in the United States.
To do business in Canada, you may need to register for the GST/HST and obtain a Canadian Business Number. American companies selling through the Amazon marketplace may want to set up a North America Unified Account (NAUA), which allows you to create and easily manage product offers in Canada, Mexico, and the U.S. Newer seller accounts on Amazon.com should be automatically enabled, but if your account is older, you may have to set up a NAUA.
If you want to utilize Fulfillment by Amazon (FBA) in Canada, you’ll have to use a fulfillment center there, too. This will require importing your products into Canada. We won’t go into all the details about setup here — to learn more about what you’ll need to do before selling in Canada through FBA, check out the Amazon Global Selling guide.
What we can go into detail about is sales tax. And even though Canada’s system isn’t quite as complex as the sales tax system in the U.S., it isn’t simple.
Sales tax in Canada
Canada has only national and provincial sales taxes, so you don’t have to worry about different rates in smaller jurisdictions like you do in the U.S. In Canada, there are three different types of taxes:
- Goods and Services Tax (GST). This is the national sales tax. It’s 5 percent across the country.
- Provincial Sales Tax (PST). Some provinces and territories add a tax on top of the GST and require businesses to register and remit the PST separately for the specific province. Currently, PST (or QST in Québec) ranges from 6 to 10 percent.
- Harmonized Sales Tax (HST). Other provinces and territories have an HST, which is a combination of a PST and the GST that allows businesses to remit the entire amount to the Canada Revenue Agency instead of dealing with the separate provinces. HST can be up to 15 percent.
The following provinces use the HST:
- New Brunswick
- Newfoundland and Labrador
- Nova Scotia
- Prince Edward Island
In the following provinces, you need to collect the 5 percent GST plus the PST/QST:
- British Columbia
- Québec (QST)
There’s no local tax in Alberta or in the three Canadian territories — the Northwest Territories, Nunavut, and Yukon — so only the GST applies.
Nexus and the small-seller exception
By comparison, it’s a lot easier to figure out where you need to collect sales tax in Canada than in the States: If you’re required to collect and remit in one province, you’re required to collect in all of them.
However, you might qualify for the small supplier exception: If you shipped less than $30,000 of orders into Canada over the previous four quarters, you’re not required to collect GST or HST. (Keep in mind that this is a “rolling” period, not a calendar year.)
One important note: Some provinces require provincial sales tax to be collected no matter what — even by small sellers. To avoid this, you could simply refuse to take orders from those provinces.
And just like in the U.S., some goods and services are exempt from Canadian sales tax entirely; they’re called “zero-rated” items. You can see the list of zero-rated goods here. Businesses that only sell exempt supplies generally don’t have to register for GST or HST.
Sales tax might seem a little easier in Canada, but remember, there are a lot of other things to consider when selling there, such as customs and labeling requirements.
For more details on the various rates, rules, and regulations, check out the Canada Revenue Agency website.
Good news: You don’t have to do it all yourself
Avalara makes it easier to calculate your taxes and file tax returns in any province in Canada. Visit our Help Center page on Canadian taxes, or call us at 877-759-6520 to learn more.