Tax 101 for Canada

For starters, it is absolutely mind boggling to determine how to set taxes or how to tell if we even have to charge one at all. Thinking of numbers and equations alone could overwhelm most of us already but we've got you covered. Here's a short and sweet 101 on Tax ID basics per country. This will be updated regularly so keep an eye out to learn more on different country tax policies.

What is a Sales Tax ID?

The sales tax Id is also called a Retail or Reseller's License, State Sales Tax Id, Tax Id, Resale Number, Resale Certificate, or Vendor's License.

All of these names are referring to one thing: A certificate issued for a small fee by your state (if you live in Canada or the US) or country that says you are registered to collect sales tax. You can usually get one from your State's website - just Google 'Your State + sales tax'.

Taxes for Canada

How to set taxes for customers within Canada?

The rule of thumb is that you charge your customer the GST or HST of the province where the shipment is being delivered. One exception applies when the receiver and shipper are in the same province; in this case, you charge the GST and PST. If the province harmonized their taxes, you will charge HST. For example, your company is registered in Ontario and you are shipping from Ontario to Quebec. The only taxes that your customer should pay are the GST, which applies to shipping cost as well. On the other hand, if your company is registered in Quebec and you are shipping to Quebec then you have to charge the GST and PST.

Same idea applies for all Canadian Provinces: Yukon, Northwest Territories, Nunavut, Alberta, Saskatchewan, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador.

What if your customer is outside Canada?

If your customers’ shipping address is outside of Canada then no tax should apply to the product price or shipping rate.



P.S.
Please confirm all the details mentioned on your local tax authority in Canada just to be sure and to protect yourself as a seller and taxpayer as well.

Happy Selling! :)


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nice write up,,What happens if you and your site is from canada but your supplier is drop shipping the item from another country?Do you still charge Canadians taxes on your site?


Thanks

Peteman

Hi Pete,

Any drop shipped product from outside of Canada that has any import tax applicable will be imposed to the customer receiving the goods by Customs

Thanks fudjj for the response


peteman

When drop shipping from abroad I believe you are expected to collect GST/HST from the customer, and also if the package value is $20 or more, the delivery service will charge them GST again. They can apply for a rebate on that GST by filling out a form, but they won't be happy about it. If you drop-ship into Canada, focus on items with a declared value less than $20.