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To GST or not to GST? That is the question.

Thomas Taggert
Dec. 12 2022

To GST or not to GST? That is the question.

If you are a US e-commerce brand shipping to consumers in Canada, you’ve probably been told that you need to register for Canadian federal and provincial tax IDs and that you need to complete Canadian tax filings every quarter.

And you’ve probably been told this by a Canadian tax advisor who probably makes his/her money registering and completing a bunch of Canadian tax filings for you.

As ESPN’s Lee Corso would say, “Not so fast, my friend!”

Understanding your business

It’s unlikely that your Canadian tax advisor fully understands your distribution model and customs clearance program, and you need to consider both the trade and tax implications for getting an accurate interpretation of how you should remit Canadian taxes. Before you register for all of these Canadian tax IDs, we encourage you to get a second opinion because there could be significant negative repercussions once you have registered. Having a Canadian GST number also puts you into a more expensive customs clearance method, eliminates the benefit of duty and tax de minimis, and creates paperwork because you have to pay taxes twice, then try to reclaim a portion of what was paid as a tax credit.

Will I need to register for a Canadian tax ID?

The reality is, it is very unlikely that you would have to register for a Canadian tax ID. Nearly all US direct-to-consumer Brands are “unregistered non-resident” shippers. They are not required to register for a “Goods & Services Tax/Harmonized Sales Tax Business Number,” nor must they report or file Canadian taxes separately.  

For “DDP” shipments where Canadian taxes are collected at checkout, all taxes owed are paid at the border when the shipment clears Canadian customs. Under this model, there is no further obligation or tax liability for the US Brand. Canada Border Services Agency (CBSA) facilitates the collection of all taxes owed, and Canada Revenue Agency (CRA) is perfectly happy with this arrangement. 

This same arrangement also exists between CBSA and Canada’s provinces that have a Provincial Sales Tax (PST). This means that PST is only owed, and only collected if a consumer lives in a PST province and the shipment clears customs in that same province. 

For example, CBSA would not collect PST for a shipment bound for a consumer in British Columbia (a PST province) if the shipment clears customs in Ontario (not a PST province). 

That’s a long way of saying that you don’t need to worry about Canadian taxes at all – not GST, HST, PST or even QST – if you are a US Brand shipping casual goods to consumers in Canada that are for their personal use and not for resale. All taxes owed will be accounted for at the border.

This model holds true unless you are a:

  • Canadian company

  • US company already registered for and reporting GST/HST

  • US company shipping commercial goods for resale to Canadian retailers, wholesalers, or fulfillment centers

  • US company storing inventory in Canada and fulfilling Canadian orders from this warehouse

If you fall into any of these categories, you have a more complex tax structure and we would need more details to assess your tax liability fully.

We know shipping to Canada can seem complicated, but the Passport team is here to help. Reach out to us today at hello@passportshipping.com or schedule some time with us here.

Disclaimer: This document does not constitute trade or tax advice. It is provided as a background document for informational purposes only. Merchants should consult a Canadian tax and trade attorney for guidance on their particular situation.

 

About the author

Thomas Taggart is a cross-border veteran with more than 20 years of experience in international trade, supply chain, and product development. As Head of Global Trade for Passport Shipping, Thomas helps e-commerce brands go global by simplifying international customs, trade, tax, and product compliance issues.

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