Internet sales have grown significantly over the past several years, and have absolutely skyrocketed during the COVID-19 pandemic. While some retailers sell goods both online and in-store, others operate solely online. No matter what type of retail business you operate, you need to understand your Canadian sales tax obligations.
What is the GST/HST?
The federal Goods and Services Tax/Harmonized Sales Tax (GST/HST) applies to most goods and services supplied in Canada. Canadian-based retailers with sales of more than $30,000 including associated entities are required to register and charge the GST/HST where applicable. Businesses not in Canada are not required to register for GST/HST if they are not carrying on business in Canada.
Selling online between provinces
The general rule is that a GST/HST-registered online retailer who has a physical presence in one province and sells taxable goods to consumers in other provinces is required to charge the GST/HST based in where the goods are delivered.
Recent changes for non-residents of Québec
The Quebec government has broadened QST registration requirements for non-residents of Quebec. Starting in 2019, Québec implemented a specified registration system requiring non-residents of Quebec to register and collect QST on their sales of digitized goods and services directly to persons in Québec not registered for QST.
British Columbia PST
BC PST applies at a rate of 7 per cent. Businesses located in Canada but outside BC need to register if they meet all of the following conditions:
– sell taxable goods to customers in BC;
– solicit orders for sale to purchasers in BC by advertising (specifically targeted for the BC
market) or other means;
– accept purchase orders (including over the internet) for taxable goods from customers
located in BC; and
– deliver goods into BC, whether physically or electronically, or through a third-party courier.
Small sellers are not required to register for PST in BC provided certain conditions are met.
Manitoba levies PST at a rate of 8 per cent. A business located outside Manitoba may also be required to register for PST if it has online sales of taxable goods and all of the following conditions are met:
– the goods are acquired to be used in Manitoba (and not for resale);
– the vendor delivers the goods into Manitoba;
– the vendor solicits orders for the sale of goods in Manitoba by advertising or by any other
means. This would include solicitation by email targeted towards Manitoba customers; and
– the vendor accepts purchase orders that originate in Manitoba.
Saskatchewan levies PST at a rate of 6 per cent. Non-resident vendors making online sales of goods must
register for Saskatchewan PST if they meet all of the following conditions:
– the goods are acquired for use or consumption in Saskatchewan;
– the vendor causes the property to be delivered in Saskatchewan;
– the vendor solicits orders in Saskatchewan through advertising or any other means; and
– the vendor accepts purchase orders that originate in Saskatchewan.
Making sense of our sales tax patchwork
GST/HST was intended to be a national sales tax system that applies uniformly across the country. That is clearly not the case today. Despite the government’s best intentions, businesses with customers in Canada face a variety of rates and rules based on jurisdiction. For online retailers who easily sell across provincial borders, this tax patchwork makes it even more important to remain up-to-date on sales tax changes across the country.
Scott Conner is a partner in BDO’s Huntsvile office, with over 20 years of experience providing corporate and personal tax planning strategies for family-owned businesses, entrepreneurs, and large corporations. He helps his clients with shareholder remuneration strategies, estate planning, as well as business structuring to minimize taxes.