Disclaimer: Please note this article is not financial advice. The purpose of our blog is purely educational, so please consult a professional accountant or financial advisor before making any financial decision.
As a rookie Amazon seller, you need to know that Canada has its own set of rules regarding sales tax. On your plate are these taxation regulations together with tons of Amazon.com business management tasks. You will be overwhelmed initially because of the multitude of goals like setting up and optimizing your Amazon store and busying yourself with product marketing and advertising. The work never stops—when you start getting sales, you need to abide by the Canadian sales tax regulations. Let us introduce you to some basic knowledge that can get you on track and keep your business running. Let’s begin.
A Heads-up on Canada Sales Tax
Despite the daunting sound of taxation and the Canada Sales Tax Act, sales tax across Canada isn’t that difficult to understand. With patience and suitable sources of information, you can get a hold of some basic knowledge, like these concepts we will share below.
Understanding Goods and Services Tax (GST)
GST is Canada’s federal tax charged to all taxable goods sold in the country. Only Alberta, Northwest Territories, Yukon, and Nunavut charge GST solely among Canada’s 13 provinces. A rate of 5% is included in every sale sent to these areas.
For instance, you sell a $17.99 teddy bear, and someone from Alberta bought it. The computation will be $17.99 teddy bear price x .05 tax rate in Alberta = 0.8995 sales tax will be added to the buyer’s bill.
In the Know About Provincial Sales Tax (PST)
Meanwhile, British Columbia, Manitoba, Saskatchewan, and Quebec (Quebec Sales Tax/QST for this province) charge PST/QST on top of GST. These provinces have specific provincial taxation regulations you should familiarize yourself with if your target buyers live in these areas. For instance, in British Columbia, Manitoba, and Saskatchewan, even those Amazon businesses advertising in various ways, resellers, and end-users are to be charged sales tax. Quebec has sets of rules for tax exemption, and knowing the details is a must.
The Provinces Adhering to Harmonized Sales Tax (Hst)
The Canadian government has created a way for sales taxation to be easier—through HST. HST is an all-in-one tax rate for GST and PST. However, not all provinces adhere to it. Only New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island follow it. While it is also the goal of HST to lower sales tax, it remains subject to debate if it works as such. The same calculation applies; the Canada sales tax rates are multiplied by the price of the goods sold.
Registering to the Canada Revenue Agency (Cra)
To determine if you need to charge sales taxes on your items, you first need to see if you are a small supplier or not. If the $30,000 threshold is not reached for the whole year, registering for sales taxation is not required—this is the case for most small businesses. You may opt to voluntarily pay for it if you’d like. However, if you go over the threshold for a single or consecutive quarter, registering to the CRA is required. Check out the complete guide from CRA for more information.
Managing Your Amazon.com Finances
Now that you know all these sales tax details, you have a head start on an essential part of your Amazon business. Managing your inventory, income tax returns, bookkeeping, and accounting follows as these are key business areas connected to sales tax.
Inventory Management
As you monitor your sales taxes, you also keep track of the products sold and left on the shelf. This information will allow you to decide which products to replenish and delay new orders. You can also get insights into why products sell better than others by consulting a sales tax report. Of course, after sales tax and other taxes you need to pay, you’ll see actual revenue that you can use to scale your business.
Bookkeeping and Accounting
You can further monitor everything with your business, especially your money, through bookkeeping and accounting. Sales tax is only one of the many factors bookkeepers and accountants will track. It can also track all your Fulfillment By Amazon (FBA) inventory and different fees charged. It will be easy to generate reports and see a complete picture of your business when you have all this data.
Income Tax Returns
Like many income tax returns, income tax Canada is also charged by knowing the total income of the business and checking the income tax to be charged through tax brackets. When you monitor all income and expenses in your Amazon business, including sales tax, income tax returns computation, and remittance will be easier. The hassle of paying taxes is rooted in the non-tracking of all business transactions and cramming tracing when tax season nears.
The Assistance You Can Get
You do not need to handle all the tasks alone in managing your business. There is plenty of software and firms you can partner with. Good software is an excellent investment to automate your business processes while partnering with agencies allows you to have experts on Amazon on your side, helping you grow your business.
FBA
When you use FBA for your business, you will be free from the worry of finding a warehouse for your products. You can ship the goods straight from the manufacturer to FBA centers. Amazon will also be in charge of inventory monitoring, returns, and refunds. All you have to do is check the status on Seller Central.
Amazon Marketplace Facilitator (MPF)
Meanwhile, when it comes to sales tax collection and remittance, Amazon will collect sales tax by default, especially in Canadian provinces under its jurisdiction. Only British Columbia is not under the MPF, but it still tracks sales from the area. If you want to view complete data, you can utilize the Amazon Tax Collection available from the Amazon system.
Professional Bookkeepers and Accountants
Finally, it would be best to have trained accountants and bookkeepers working on your business transactions and finances from the very beginning. The visibility of your business finances and regular financial reports will serve as your guide. With accurate reports, you can check whether you are on track with your business goals or need to make adjustments to your game plan.
Get Assistance From Unloop!
Canada is a great place to start and grow your small business, but you need the proper knowledge and guidance. We're here for that! Do any of these points sound familiar?
- Registering with CRA
- Understanding GST/PST rates in your province
- Setting up your Amazon account as an individual or corporation
- Inventory management on Amazon's FBA program
- Accounting services like bookkeeping and tax returns
Then, we can help you out. Have questions about what it takes to be successful in Canada on Amazon? Give us a call at 877-421-7270. We’d love to discuss our offers with you!