Canadian Sales Tax on U.S. Sellers: GST/HST and PST Rules, Nexus Equivalent, Exceptions, Cash Flow Improvement (Refund) Opportunities and Planning Considerations

Description

With more than $480 billion of trade to Canada, a large portion of purchases by Canadians are from U.S. vendors and almost all of these sales have tax implications. Tax professionals need a complete understanding of the Canadian sales tax regime to avoid any unintended liabilities for U.S.-based sellers.

U.S.-based businesses providing property or services in Canada may need to register and obtain a Canadian Business Number. Canada applies sales taxes on the sale of certain real/tangible/intangible property as well as services based on “place of supply” rules that determine the province of supply. The GST/HST is the federal sales tax that applies at one rate or another on supplies made throughout Canada with rates that range between 5% and 15%. Some provinces also impose a PST in addition to the base 5% GST, which may require businesses to register and remit the PST separately for a given province.

Under certain circumstances, a U.S.-based business may not be required to transact Canadian sales tax. For instance, some may not be viewed as carrying on business in Canada (a nexus test equivalent), others may qualify for the small supplier exception or may be engaged in providing certain types of property and services that are zero-rated or exempt from Canadian sales tax. Tax professionals must recognize crucial issues under applicable tax laws and registration requirements that can minimize overpayment of tax and even provide lucrative cash flow improvements in the form of rebates and input tax credits.

Listen as our panel discusses Canada's GST/HST, QST and PST, as well as compliance challenges for U.S.-based sellers.