ECommerce Sales Tax Rules
How Does Selling Online and Sales Tax Work?
Canadian eCommerce Sales Tax Rules
The rules outlined by CRA provide that all Canadian retailers making sales in Canada, either through a physical “bricks and mortar” location or online, are required to be registered for GST/HST unless they are considered a small retailer (which is a business with sales of less than $30,000 annually).
In addition, a retailer (that is not a small retailer) with only one physical location in Canada that sells across Canada through their on-line store would be required to charge and collect GST/HST at the rate that applies to the province in which the taxable goods are delivered to. For example, a retailer with a physical location in Alberta that sells and delivers goods to an Ontario customer would be required to charge and collect GST/HST at the current rate in Ontario, not Alberta.
A Canadian resident on-line retailer with no physical “bricks and mortar” location would also be required to charge GST/HST at the rate that applies to the province in which the taxable goods are delivered to. For example, let’s say a company incorporated in Ontario that does not have any physical stores, sells taxable sporting goods online via ecommerce. If the company arranges for the delivery of its product to a consumer in British Columbia, it is required to charge and collect GST/HST at the rate in British Columbia from the customer, even though the company was established in Ontario.
eCommerce Sales Tax and Nexus in the United States
If you are a Canadian Ecommerce business selling into the USA everything changed for you regarding sales tax in June 2018 with the Wayfair decision.
On June 21, 2018 the Supreme Court of the United States ruled in favour of the state of South Dakota v. Wayfair, Inc. The decision overruled a longstanding physical presence rule, allowing states to require remote sellers to collect and remit sales tax.
Since the Wayfair ruling, most (but not all) states have adopted new rules defining what establishes a sales and use tax obligation, known as nexus. Unfortunately for businesses, no two state sales tax nexus laws are alike.
There are many ways to establish sales tax nexus — the connection between a business and state that creates a sales tax collection requirement — and no two state sales tax laws are exactly alike.
Here is a link to nexus sales tax laws by state.
Determining which laws apply to your business is hard, but it’s a crucial step toward compliance.
AIS Solutions will ensure you are up-to-date in understanding where you have nexus and more importantly make sure you maintain your compliance so you avoid any penalty fees.