"If I am making online sales 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 Canadian ecommerce.
This article explains how to handle provincial sales taxes (PST) on your online sales.
GST and HST
We can't talk about provincial sales tax (PST), though, without talking about the Goods and Services Tax(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 Provincial Sales Tax - 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.
And as five provinces now have Harmonized Sales Tax, (B.C., Ontario, Nova Scotia, New Brunswick, and Newfoundland and Labrador), you will want to voluntarily register for the GST. (It's also to your advantage to do so because as a GST registrant, you will be able to claim Input Tax Credits on the goods and services you purchase for use in your business.) Here's How to Register for the GST/HST.
General Tax Rules
The general rules for determining what taxes to apply to your Canadian ecommerce sale are:
1) if you are selling goods or services in your own province, the tax rules for your own province or territory apply. So, for instance, if your business operates in Ontario and you sell an item online to someone in Ontario, you would charge 13% HST on the sale.
2) if you are selling goods or services out of province, you charge the GST/HST rate based on where the goods are being shipped to. So, for instance, if your business operates in Ontario and you sell an item online to someone in New Brunswick, you would charge 13% HST on the sale.
3) If you are selling goods or services out of province to Alberta, the Northwest Territories, Nunavut or Yukon, which have no provincial sales tax, you would charge only GST (5%) on the sale.
Note that all of these examples assume that you are selling taxable goods and services.
But what if you sell something online to someone in Manitoba, Saskatchewan, Quebec or Prince Edward Island? All four of these provinces have provincial sales tax.
The General PST Attitude
The consensus seems to be that the various provincial governments want out-of-province vendors to register for, collect and remit the applicable provincial sales taxes even when they are making online sales. 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.
The next page provides more information on the provinces' positions on Provincial Sales Tax and out-of-province vendors and includes a list showing which taxes need to be collected and remitted for each province. Click to continue reading...
