I always wondered why there seemed to be so few online business in Canada compared to the United States. Even companies like Amazon have a limited online presence in Canada, in contrast to its U.S. equivalent.
While looking into the Canadian business laws for online retail businesses, I found the answer. Because of the nature of our Government, its primary objective is to collect as much tax dollars as possible, so to be able to finance all our social programs. As a consequence, capitalistic endeavors pay the price; it gets much more complicated to do business here. To prove my point:
If you are a company operating in the United States that sells products across the country through an online store, book-keeping and tax collection is quite simple. If you have a physical presence in a State, you must collect sales tax on applicable goods. If you don’t have a presence, then you don’t have to collect sales tax in that specific state. Simple enough, right? Here’s the text excerpt from the US government website:
If your business has a physical presence in a state, such as a store, office or warehouse, you must collect applicable state and local sales tax from your customers. If you do not have a presence in a particular state, you are not required to collect sales taxes.
For Canada on the other hand it’s, well, not so clear. Some provinces ask you to collect provincial tax even if you don’t have a physical presence, while others “strongly recommend it” – whatever that means. It isn’t clear cut. In sum, here’s what the tax collection picture looks like (about.com):
- BC – GST & PST
- Alberta – GST
- Saskatchewan – GST & PST voluntarily (unless is home province)
- Manitoba – GST & PST
- Ontario – GST & RST if have a “business presence” (unless is home province)
- Quebec – QST
- New Brunswick – HST
- Nova Scotia – HST
- Newfoundland & Labrador – HST
- Prince Edward Island – GST & PST voluntarily (unless is home province)
- Northwest Territories – GST
- Nunavut – GST
- Yukon – GST
So if you plan on doing business across Canada, be prepared for a lot of “paperwork”. You have to register for a tax account in all those provinces and do your yearly declarations, etc. Essentially, be sure to contact Canada Revenue Agency if you want to do this right.