eCommerce Sales Tax in Canada (Simplified)
eCommerce Sales tax in Canada can be a complicated ordeal. eCommerce businesses in Canada are thriving like never before! Since 2020, there has been a new wave of businesses going online and shoppers are now accustomed to online shopping from all over the country.
As an online entrepreneur, it’s crucial to stay ahead of the game by having a general understanding of how eCommerce sales tax works in Canada. In this guide, we will discuss Goods and Services Tax (GST), Provincial Sales Tax (PST), and Harmonized Sales Tax (HST).
Along the way, we’ll explore tax considerations for the major platforms, including WooCommerce, Shopify, Amazon, eBay, and BigCommerce.
As the tax rules are similar across all industries. This post can be used by any small business to understand fundamentals of GST/HST/PST. Let’s dive in!
Table of Contents
Understanding eCommerce Sales Tax in Canada
To effectively manage sales tax for online transactions, eCommerce businesses must understand the three types of sales taxes in Canada: GST, PST, and HST. Online sellers must consider these taxes when calculating the sales tax for their eCommerce transactions.
GST for eCommerce
The Goods and Services Tax (GST) is a federal tax that applies to most goods and services sold in Canada. eCommerce sellers must charge GST on taxable goods and services, including products sold on platforms such as WooCommerce, Shopify, Amazon, eBay, and BigCommerce.
Generally, you must register for GST/HST if you have over $30,000 in sales. The specific rules are complicated, so make sure to get personalized advice.
There is also an option for voluntary registration. Depending on your circumstances, it may be a good idea to register early.
Provincial Sales Tax (PST) in Canadian Provinces
PST is a provincial tax that varies depending on the province. Here’s a brief overview of PST rates and regulations across Canadian provinces:
| Province / Territory | PST Rate |
|---|---|
| British Columbia | 7% |
| Manitoba | 7% |
| Quebec | 9.975% (QST) |
| Saskatchewan | 6% |
Please note that Alberta, Northwest Territories, Nunavut, and Yukon do not have a provincial sales tax.
While some provinces have combined GST and PST together to make HST, the provinces above have kept them separate. Which means there is a separate registration, collection and remittance requirement for each province.
It is important to keep track of when you are required to register and collect PST.
Harmonized Sales Tax (HST)
Some provinces have combined their PST with the federal GST to create the Harmonized Sales Tax (HST). GST/HST rates are as follows:
| Province / Territory | GST/HST Rate | Notes |
|---|---|---|
| Alberta | 5% (GST) | No HST; only GST |
| British Columbia | 5% (GST) | No HST; only GST |
| Manitoba | 5% (GST) | No HST; only GST |
| New Brunswick | 15% (HST) | Combines 5% GST and 10% PST |
| Newfoundland and Labrador | 15% (HST) | Combines 5% GST and 10% PST |
| Northwest Territories | 5% (GST) | No HST; only GST |
| Nova Scotia | 15% (HST) | Combines 5% GST and 10% PST |
| Nunavut | 5% (GST) | No HST; only GST |
| Ontario | 13% (HST) | Combines 5% GST and 8% PST |
| Prince Edward Island | 15% (HST) | Combines 5% GST and 10% PST |
| Quebec | 5% (GST) | Combines 5% GST and 9.975% QST (Quebec Sales Tax) |
| Saskatchewan | 5% (GST) | No HST; only GST |
| Yukon | 5% (GST) | No HST; only GST |
In a sense the terms GST and HST are interchangeable. When a province combines the GST and PST together they get HST. If you are registered for GST, then you will be collecting GST/HST by default for every province that has either GST or HST.
The complication comes in when you have to register for PST (based on specific criteria). Generally this takes place when you have physical goods or you sell large amount of items in the PST exclusive province.
What rates should be charged by eCommerce sellers charging sales tax in Canada?
This will come down to the place of supply rules. To charge the correct rate to the buyers, eCommerce sellers will have to know what they are selling and where their item is being shipped.
As long as you include your business number in the settings, some platforms will automate this process for you. Never the less, it is still important to understand the mechanics behind how the rates are being determined.
Put simply the place of supply rules state that the GST/HST tax rate being charged will depend on the buyer and their address.
For example, a seller located in Ontario with an Amazon FBA store sells a pair of glasses for $100 to a customer located in Nova Scotia. The GST collected on their sale would be $100 x 15% = $15. In this specific example, Amazon.ca will automatically charge the correct GST rate during checkout and payment.
This will then be paid to you as part of your regular deposit and has to be remitted back to the government during the filing.
Platform-Specific eCommerce seller Sales Tax options in Canada
Different eCommerce platforms have unique approaches to handling sales tax. I’ll provide an overview of the most popular platforms:
WooCommerce Sales Tax: WooCommerce enables sellers to configure tax settings and automate sales tax calculation for their online store.
Shopify Sales Tax: Shopify offers an automated system for calculating sales taxes based on the seller’s location and customer’s shipping address.
Amazon Sales Tax: Amazon collects sales tax on behalf of sellers for orders shipped to customers in certain provinces.
eBay Sales Tax: eBay requires sellers to set up tax tables for provinces where they must collect sales tax.
BigCommerce Sales Tax: BigCommerce provides tax settings and integrates with third-party tax calculation services for accurate sales tax collection.
What should you do? (important)
For growing companies keeping accurate records is important to make sure you can appropriately determine your tax obligations. This is also where bookkeeping and reporting comes in!
Reports can be run from your platform to analyze sales numbers in various provinces. This will help determine the stage of your business and what your compliance obligations are.
A qualified CPA who understands the sales tax rules can review your numbers provide the correct guidance.
Conclusion
Understanding and managing eCommerce sales tax in Canada is essential for online businesses to maintain compliance and avoid potential penalties. By staying informed about sales tax regulations, including GST, PST, and HST, and getting appropriate guidance, eCommerce sellers can meet their tax obligations while focusing on growing their business.
If you need assistance with eCommerce sales tax in Canada, feel free to reach out to us for expert guidance and support.
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