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.
When it comes to selling products on Amazon, it's crucial for Canadian sellers to understand their income tax obligations. With the rise in online businesses and the increasing popularity of Amazon as a selling platform, you need to know the details and pay the right amount each time.
This article aims to provide Canadian Amazon sellers with a general overview of Amazon seller income tax in Canada. We hope to equip eCommerce sellers like you with the necessary knowledge in securing tax obligations and maximizing business profits.
Here are 8 frequently asked questions, answered:
A sales tax is a value-added consumption tax included in the sales price of goods and services. The sales tax is paid at the buyer's expense, which the seller must file to the appropriate tax authorities.
The Canadian government imposes three different taxes for the computation of a sales tax:
The federal goods and services tax, or GST, is a value-added tax imposed by the government on goods and services. The standard rate for the GST is 5%.
Provincial sales tax, or PST, on the other hand, is a different value-added tax levied locally on the same goods and services that business owners have sold. The rate for the PST is 6%-7%.
The Harmonized Sales Tax (HST) is a uniform rate for five of the thirteen provinces and territories of the Canadian government. In provinces following the HST, the GST or the provincial sales tax PST do not apply.
Instead, there is a single rate for all five provinces, which is 15% (except for Ontario, which charges a 13% sales tax). With the harmonized sales tax (HST), you only need to file one (1) tax return for all five provinces, removing the hassle of doing your taxes.
The Quebec Sales Tax is similar to the Canadian provincial sales taxes (PST) in function, with only the rate being different. If the provincial sales tax is at 6%-7%, then the Quebec sales tax is at 9.975%
The sales tax, while consistent among countries as an attachment to purchasing goods and services, comes in different computations depending on a nation's tax policy.
Now, here's where it can get confusing. You can compute Canada's sales tax in three ways:
First, there is the standard federal sales tax plus provincial taxes. In these provinces, you must add the federal goods and services tax to the local taxes. For example, the sales tax in British Columbia and Manitoba is 12%, coming from a federal sales tax of 5% and provincial taxes of 7%.
Next, some provinces do not impose provincial sales taxes and instead collect only the federal sales tax of 5%. Such provinces include:
Finally, there is the HST. Since the federal taxes and local taxes no longer apply, you can mark your sales tax in provinces under the HST at 15% (except Ontario, with an HST rate of 13%).
Check out the different Canadian sales tax rates below for the specifics:
|Provinces Using Harmonized Sales Tax|
|Newfoundland/Labrador (15%)New Brunswick (15%)Nova Scotia (15%)Ontario (13%)Prince Edward Island (15%)|
|Provinces Using Goods and Services Tax + Provincial Sales Tax|
|British Columbia (12%)Quebec (14.975%)Saskatchewan (11%)Manitoba (12%)|
|Provinces Using Goods and Services Tax Only|
|Alberta (5%)Northwest Territories (5%)Nunavut (5%)Yukon (5%)|
Marketplace facilitators (MPF) handle tax work for third-party sellers. MPF legislation defines ab MPF as a marketplace that allows third-party sellers to sell physical and digital property, goods, and services online.
Amazon, being an MPF, is now responsible for calculating, collecting taxes, and remitting Canadian taxes for their third-party Amazon sellers on taxable sales covered by MPF legislation.
Fulfilling your tax obligations as a Canadian seller can be tedious, but it’s a must. Failure to file and remit sales taxes could lead to criminal charges and could foresee the end of your time as a business owner.
Canadian eCommerce sellers or international sellers have to pay GST/HST.
As the business owner of a Canadian company, you're obliged to pay your Canadian taxes. But for your sales to be taxable, you'll have to open a sales tax account with the Canada Revenue Agency, also known as a GST/HST account.
If you're a Canadian seller with worldwide business income less than or equal to $30,000 for a period of 12 months, you're considered a small supplier and are prohibited from filing for and charging sales taxes. You can collect sales tax and remit on the product or service that surpasses $30,000.
Foreign Amazon sellers with a gross income of over $30,000 in Canadian sales are required to open a sales tax account to pay HST/GST.
Sales tax filing deadline in Canada is April 30, with income tax returns collection beginning around February. Nevertheless, payment for Canadian taxes is usually collected monthly or annually. If your business income is less than $1.5 million in sales, then you can pay annually.
In some provinces, however, the cap is lower. For instance, in Saskatchewan, if you collect less than $3,600, you can pay annually. Then if your taxes are paid on time during the first year, you'll be paying the next few years annually. It would be best to check with the province local rules on monthly, quarterly, or annual tax filing to be sure.
You can pay your GST/HST in three ways:
You can pay your Goods and Services Tax/Harmonized Sales Tax using a financial institution's transaction methods or online banking services. The Canadian Revenue Agency (CRA) has a new online payment method called MyPayment. You can try different payment options using MyPayment. Check their website for different payment options for businesses and individuals.
On the other hand, if you want to pay your GST/HST through a financial institution, use Form RC158, Remittance Voucher - Payment on Filing to pay the amount you owe. These tax forms aren't available online since they come in pre-printed format.
The following tax-related forms are also available:
You can also send your payment by mail. However, payment sent by mail should be under $50,000, regardless of currency. Any mail equal to or above $50,000 should be remitted electronically or through a financial institution.
If you're not paying in Canadian dollars, simply pay the equivalent amount in the available currency.
There you go!
We hope we've provided you with valuable information on Canadian sales taxes, including the different rates and how to compute them.
Remember the recent changes in tax policy that allow Amazon to collect and remit taxes for third-party Amazon sellers. And of course, do not forget that failing to pay taxes can have serious consequences, including criminal charges.
If you need assistance from a tax professional for your Harmonized Sales Tax, Provincial Sales Tax, Quebec Sales Tax, and Goods and Services Tax to keep a clear record to the Canada Revenue agency, partner with Unloop!
We can handle your sales taxes or accounting solutions specifically for your Amazon store. Feel free to contact us. We'd love to discuss your services with you.
Unloop is the first and only accounting firm exclusively servicing ecommerce and inventory businesses in the US and Canada. With the power of people and technology, our team dives deep into COGS and inventory accounting. You are paired with a dedicated bookkeeping team that prepares accurate financial statements, financial forecasts, and can also pay bills or run payroll for you. Come tax time, everything is organized and ready to go, so you don't need to worry. Book a call with an ecommerce accountant today to learn more.