"If I am selling taxable goods and/or services through a website to people in other provinces, do I have to charge and remit other province's sales taxes?" is one of the most common questions about ecommerce.
This article explains how to handle provincial sales taxes (PST) on your online sales.
We can't talk about provincial sales tax (PST), though, without talking about GST. Generally, if you are selling taxable goods and/or services to people in Canada, you will be charging and remitting GST to the federal government. (You will not charge GST on taxable goods and/or services shipped to people in other countries, such as the U.S.)
Many small business owners are aware that you don't have to charge and remit the GST if you are a small supplier. However, there seems to be a general misconception that the concept of being a small supplier also applies to PST - which is not true. Whether or not you have to register for and collect PST has nothing to do with the size of your business or the volume of your sales. It's just a matter of whether or not you're selling taxable goods and/or services.
Even if you do qualify as a GST small supplier, if you are taking orders from and shipping goods to customers in other provinces, you will want to voluntarily register for GST because of Harmonized Sales Taxes (HST). If you are selling and shipping goods into the HST provinces (Nova Scotia, New Brunswick, and Newfoundland and Labrador), you're going to have to collect GST anyhow as it's part of HST. (Here's how to register for the GST.)
So that's three provinces where you will have to collect provincial sales tax, so to speak, as it's part of the HST. You will also definitely have to charge and remit the provincial sales tax (a.k.a. PST, retail sales tax, or RST) in your home province if you are selling taxable goods and/or services. (Because of the complexity of what's taxable and what's not, you should check the PST rules in your province. See PST/RST for a list of provincial websites and information.)
So so far, in terms of taxes on your online sales, you are responsible for collecting and remitting:
* HST for Nova Scotia, New Brunswick, Newfoundland/Labrador
* GST for B.C., Alberta, Saskatchewan, Manitoba, Ontario, Quebec, P.E.I., Northwest Territories, Nunavut, Yukon
* PST/RST for orders shipped to customers in your own province (unless your home province or territory is Alberta, the Northwest Territories, Nunavut or Yukon which have no PST/RST)
But what about the others? The consensus seems to be that the various provincial governments want out-of-province vendors (such as those who run websites and ship things to customers in their provinces) to register for, collect and remit the applicable provincial sales taxes. Some provinces have enshrined this demand in legislation whereas others are just politely asking, pointing out that it would be a convenience to consumers in their provinces.
PST and Out-of-Province-Vendors by Province
In British Columbia out-of-province vendors are expected to collect and remit the province's PST - including vendors selling goods through the Internet, who are specifically mentioned in Out-of-Province Sellers:
"Out of province sellers must register if meet all four of following criteria:
* solicit sales in British Columbia through advertising or other means,
* accept purchase orders originating in British Columbia,
* sell goods to British Columbia purchasers, and
* cause the goods to be delivered to a location in British Columbia.
In determining whether or not you must register, please note the following.
* Solicitation can occur by any means including mail, Internet, fax or newspaper advertisement (not a complete list).
* Orders to purchase include telephone, written or e-mail orders from a location in British Columbia, regardless of whether or not the business has an agent in the province.
* Delivery into British Columbia includes goods shipped either physically or electronically by a seller or an agent of the seller.
* Out-of-province sellers are required to hold a valid registration certificate at the time the seller causes the goods to be delivered into the province."
This addendum spells it out for website vendors:
"If you have a website that is accessible from anywhere in the world, you are not soliciting sales in British Columbia. However, if you have a website and also solicit sales in British Columbia by other means, such as promotional flyers or newspaper advertisements, you are soliciting sales in the province."
So it's the active solicitation that determines whether or not you have to charge PST in B.C. even if your business is located elsewhere in Canada and conducted over the Internet, not just the fact that you are conducting business there through your website.
The next page provides more information on the provinces' positions on PST and out-of-province vendors and includes a list showing which taxes need to be collected and remitted for each province.
Ontario’s position on PST and out-of-province vendors is similar although the definition of “business presence” may serve as a loophole. Ontario RST Guide 202 “Goods Brought Into Ontario” says:
“Out-of-province suppliers who have a “presence” in Ontario and who sell taxable goods or provide taxable services to customers in Ontario are required to obtain a Vendor Permit to collect RST. Businesses who do not have a “presence” in Ontario, but who make sales of taxable goods and services to customers in Ontario may voluntarily register with the Branch for the collection of RST. When determining if a business has a “presence” in Ontario, the Branch considers factors such as, the existence of a branch office, warehouse or storage facilities, a post office box, employees, agents, etc., in Ontario.”
Note that if you, the vendor, do not charge and collect RST, the responsibility falls onto the purchaser:
“If taxable goods and services are purchased for own use from an out-of-province vendor or supplier who does not charge and collect RST, the purchaser is required to report and pay the applicable RST on the total fair value” (Ibid.).
So if you are an out-of-province vendor selling goods or services through a Web site and shipping them to customers in Ontario, you must charge those customers RST if you have a business presence in the province. If not, the province suggests it would be nice if you would charge and collect the RST anyhow.
Saskatchewan, like B.C., takes a hard line view. The answer to the question, “I am a non-resident vendor making sales into the Province. Do I have to collect tax on my sales?” is:
"All persons making taxable sales in Saskatchewan should become licensed and collect the tax. Non-resident businesses should consider becoming licensed as a convenience to their customers. If non-resident businesses don't collect PST at the time of sale, their customers are required to self assess and remit the tax" (Saskatchewan Finance Provincial Sales Tax Common Questions).
The rules in Manitoba are very similar to those in B.C. (See Bulletin 004: Information for Vendors). Once again, if you meet these four requirements, you are required to register as a vendor and collect and remit Manitoba’s PST.
The government of Quebec appears to assume that out-of-province vendors will register and collect and remit sales tax. There is a reference in the Quebec Retail Sales Act to out-of-province businesses registering before selling taxable goods to Quebec residents (and once again, if the vendor has not collected the Quebec Sales Tax, purchasers are expected to report and remit the tax).
Although the government of Prince Edward Island “encourages” out-of-province vendors to register, collect and remit the province’s PST there is no legislation requiring out-of-province vendors to register. The province’s Revenue Act puts the onus for remitting the Revenue Tax on the purchasers.
“If you are an individual or business who purchases taxable goods in another province or country for consumption or use in Prince Edward Island, you are responsible for the payment of Prince Edward Island revenue tax (PST) on your purchases” (Tax and Land Information).
Online Sales: Which Taxes Do You Collect for Each Province?
In sum, as an online retailer accepting and shipping orders across Canada, the list of taxes you should be collecting and remitting currently looks like this:
* BC – GST & PST
* Alberta – GST
* Saskatchewan – GST & PST voluntarily (unless is home province)
* Manitoba – GST & PST
* Ontario – GST & RST if have a “business presence” (unless is home province)
* Quebec – QST
* New Brunswick – HST
* Nova Scotia – HST
* Newfoundland & Labrador – HST
* Prince Edward Island – GST & PST voluntarily (unless is home province)
* Northwest Territories – GST
* Nunavut – GST
* Yukon – GST
(*In your home province, registration for PST/RST is mandatory if you are selling taxable goods and/or services.)
This means that you should register as a Provincial Sales Tax Vendor with each of the provinces you will be doing business with and will be expected to collect and remit the sales tax accordingly.
What can you do to get around all this additional paperwork and bookkeeping? Not much. Some Canadian-based online businesses limit the areas they ship to. An Ontario based business, for instance, might only accept orders from and ship to customers in Ontario. Others only sell non-taxable goods and/or services.
The picture is further complicated by the fact that goods and/or services that may be tax-exempt in one province may be treated differently in another. So take all the information above as a guide only and be sure to check with the finance/revenue ministries of the individual provinces to be sure whether or not you have to collect and remit provincial tax when you are shipping to customers who reside there. When it comes to taxes, you can’t afford to be wrong.
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