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.
If you're a business owner aiming to sell products in Canada, Amazon would probably be among the top markets you want to be in. However, with the excitement of opening your business and seeing sales growth comes the responsibility to collect and remit sales tax.
Amazon.ca is the Canadian domain of the massive online retailer Amazon.com, and it's essential to know when you need to charge sales tax on items sold through this site. Does Amazon collect sales tax on behalf of sellers? Does Amazon automatically collect sales tax?
The rules are complex, and the policies change often. Thus, as an Amazon seller, you need to always be in the loop. In this post, we will answer the frequently asked question: when does Amazon collect sales tax in Canada, and when does it not?
When Does Amazon Collect Sales Tax?
The laws on Amazon sales tax in Canada leave no room for confusion: you need to collect sales tax. Amazon even makes the task easier for you.
So, does Amazon collect sales tax for sellers? Yes, it does, particularly in these situations.
The province is under the Marketplace Facilitator jurisdiction.
Back in the day, you could sell online without the hassle of collecting sales tax from your customers—that is, until the Marketplace Facilitator (MPF) law took effect.
The law bases sales tax charges on the established General Sales Tax (GST), Provincial Sales Tax (PST), Harmonized Sales Tax (HST), and Quebec Sales Tax (QST) rates per province.
|Province||Sales Tax Rate|
|Newfoundland and Labrador||15%|
|Prince Edward Island||15%|
Suppose you fulfill orders in different provinces across Canada. In that case, Amazon will directly collect sales taxes and remit them to authorities for you as mandated by the MPF, except for orders bound for British Columbia.
You are registered in the Amazon Tax Collection Service.
Amazon is already mandated to collect and remit sales taxes for you through the MPF. Still, Amazon’s Tax Collection Service (TCS) can give you control and visibility of your sales tax.
If you have an Amazon professional account, you can log in on Seller Central to optimize the following:
- The inventory storage/fulfillment center address (i.e., your warehouse or Amazon FBA warehouse address)
- The product tax code
- List of tax-exempt buyers
- Instances when shipping and handling charges apply
- Other local sales tax regulations
This service particularly helps if you are also selling in British Columbia. As mentioned, Amazon does not collect sales tax in the province, so it is your responsibility to collect and remit sales tax. In that case, TCS can collate sales tax data for you when tax remittance season comes.
You sell taxable goods.
Almost all products sold in Canada are taxable, from soft drinks and candies to clothing and footwear. If your products are not tax-exempt and zero-rated goods, you need to charge GST, HST, PST, or QST accordingly.
These categories are already defined on Amazon TCS, but you can further customize them. Know your products well so that you can tag them as taxable or tax-exempt.
Instances When Amazon Does Not Collect Sales Tax
At this point, you must have already figured out whether collecting taxes for your products is under your care or Amazon's. Now, here is some more helpful information on when Amazon does not collect sales taxes.
The province is not under MPF jurisdiction.
British Columbia is not under MPF jurisdiction. Thus, if you get orders from the province, it is your responsibility, not Amazon’s, to collect and remit sales taxes.
Nevertheless, you can calculate taxes easily because Amazon TCS still tracks sales taxes for orders from the region. Alternatively, you may delegate the task to sales tax support services. This way, you can still remit taxes, although it’s not as convenient as when orders come from the other provinces where Amazon does the collection and remittance for you.
A group or population is tax-exempt.
When you have access to the TCS, you can optimize the settings to exempt the following groups and populations:
- Small supplier businesses earning less than $30,000 annually
- Diplomats, government officials, and Indigenous Peoples
- Buyers with a tax exemption certificate and enrolled in the Amazon Tax Exemption Program
You sell zero-rated products.
The law mandates that if you sell goods that fall under the following classifications, they should be zero-rated:
- Fruits and vegetables
- Livestock and poultry
- Prescription drugs
- Medical and dental devices
- Products for feminine hygiene
Make sure to include these details in the TCS to exempt your buyers from paying sales tax.
Get Help from Unloop
For now, Amazon collects and remits sales tax in Canada only if
- the province is under MPF jurisdiction,
- you're registered with TCS, and
- your goods are taxable.
On the other hand, if the destination of your orders is not under MPF jurisdiction, Amazon will not collect and remit sales taxes. Amazon will also not collect sales taxes if you're selling zero-rated or tax-exempt products.
After determining the sales tax, you need to reconcile all data from TCS with your accounting books to help you with Amazon seller accounting.
We here at Unloop can help you! We have a team of experienced bookkeepers who will keep your books updated all year round so that you’re ready for tax season.
We know how important it is for Canadian sellers to stay compliant with tax laws, so skip the hassle of computing your taxes only when the deadline is near. If you are interested in getting bookkeeping assistance from experts, feel free to give us a call at 877-421-7270. We'd love to discuss our offers with you!