June 8th, 2021
With almost 40 million citizens and as one of the most digitally active and savvy countries in the world, Canada is an attractive market in which many Amazon merchants can and do thrive. Canada is the world's second-largest country, stretching east to west from the Atlantic Ocean to the Pacific Ocean and north to the Arctic Ocean. While the United States has 50 states, Canada has ten provinces and three territories. Canadians love to browse and shop online, and Amazon is one of their top destinations for online shopping.
How is Sales Tax Charged in Canada?
In Canada, almost all products and services are taxable except for those considered necessities. Such sales-tax-exempt items are ordinarily food or medical supplies. Canada charges both federal and provincial sales taxes.
When Do Sellers from Outside Canada Pay Taxes?
Anyone selling in Canada with worldwide sales over $30,000 per year, is legally obligated to collect, report and remit sales taxes to the appropriate federal or provincial tax authorities. But that's not as onerous as it sounds.
Harmonized Sales Taxes Makes Things A Little Easier
Six out of the ten Canadian provinces have "harmonized" their sales tax reporting requirements with Canada's federal government. So that means just one sales tax return for those six provinces is all that's needed. This combined reporting is known as the Harmonized Sales Tax or HST, a combination of the Federal Goods and Services Tax (GST) and the Provincial Sales Tax (PST). Canadians do like their acronyms—almost as much as they love hockey.
Here's Where it Gets A Little More Complicated
Unfortunately, Canada's four other provinces (British Columbia, Saskatchewan, Manitoba and Quebec) require that sellers collect and report sales taxes separately. In addition to registering federally to pay HST, sellers from outside Canada also need to register for each of the other four provinces to collect and pay Provincial Sales Taxes.
How Often are Sales Taxes in Canada Paid?
How often you file your sales tax returns depends on two factors. First is the jurisdiction, and the second is total sales. In most cases, sales taxes are filed and paid annually. Federal returns are due once a year if annual sales are less than $1.5 million. In Manitoba, however, the yearly sales threshold is $75,000, while in Saskatchewan, it's $60,000. British Columbia requires monthly filing in the first year regardless of sales volume but allows annual filing after that as long as taxes were filed and paid on time in the first year. The limit is different for each of the four provinces that do not participate in the HST program with the federal government. Yes, it can be a lot to keep track of.
How Often Are Sales Tax Returns Filed?
Usually, the deadline for filing sales tax returns is one to three months after the reporting period. For example, if the return is annual, the filing must take place by no later than 90 days after the end of the reporting period. If sales taxes are filed more frequently, quarterly or monthly, for instance, the filing must take place by the end of the following month. If more than $3,000 is collected and remitted during an annual GST/HST filing, sellers are required to make quarterly installments beginning the following year.
How Does Amazon Help?
Unlike in Amazon in the US, Amazon in Canada does not file or pay your sales taxes but they do collect and send the sales tax as part of your regular settlement. Sellers still have to register for sales tax numbers in five Canadian jurisdictions, file tax returns and remit taxes to the appropriate governments.
When selling directly into Canada to the end consumer, sellers have to bill Canadian clients for sales tax, collect the tax, file tax returns and pay taxes to the government. If selling into Canada directly through a Canadian wholesaler, it is unlikely the same obligations will apply.
Questions About Duties and Tariffs When Importing
If you have questions about who is responsible for their duties and tariffs when importing products into Canada we recommend asking the company who helps handle your shipping. They can provide more guidance as that is their area of expertise.
What Tax Services Are Available to Amazon Resellers Selling in Canada?
KB Financial Solutions staff have over 50 years of combined experience in bookkeeping and tax preparation. Its founder and managing partner, Brian McGill, spent 15 years with the Canada Revenue Agency (the Canadian equivalent of the IRS) as a personal and business tax auditor.
KB Financial Solutions is an experienced bookkeeping and tax preparation service based in Canada. They assist online sellers from outside Canada with Canadian tax compliance services including registration, filing and payment processing.
Canadians Are Looking for Your Products Today
With almost as many people and potential customers as California, Canada can be a lucrative and close market to enter for international Amazon sellers. Amazon Canada is growing quickly. Now that you've learned about sales tax in Canada, the next step should be selling in Canada.
For further information, contact:
Brian McGill, Managing Partner
Information provided in this post is to be used for informational purposes only.