Charging Provincial Sales Taxes on Online Sales
Canadian Ecommerce and PST
"If I am making online sales to people in other provinces, do I have to charge and remit other province's sales taxes?" is one of the most common questions about Canadian e-commerce.
Page 1 explains the basic tax rules governing GST, HST, and PST, focusing on those that apply when your business is shipping goods or supplying goods or services out of province.
Page 2 lists the HST and PST rates of all the provinces and explains the PST rules of each province as they apply to out-of-province businesses.
The general answer to the question in the opening sentence is "Yes". Online businesses are taxed just as offline, bricks-and-mortar businesses are, so generally the same rules apply.
However, as always in Canada, the answer is complicated by different rules in different provinces.
GST and HST
We can't talk about provincial sales tax (PST), though, without talking about the Goods and Services Tax (GST). Generally, if you are selling taxable goods and/or services to people in Canada, you will be charging and remitting GST to the federal government. (You will not charge GST on taxable goods and/or services shipped to people in other countries, such as the U.S.)
Many small business owners are aware that you don't have to charge and remit the GST if you are a Small Supplier. However, there seems to be a general misconception that the concept of being a small supplier also applies to Provincial Sales Tax - which is not true Tax – which is not true except in the province of BC. See Does Your Business Need to Register for BC PST? (Note that British Columbia returned to a provincial sales tax system April 1, 2013.)
In other provinces whether or not you have to register for and collect PST has nothing to do with the size of your business or the volume of your sales. It's just a matter of whether or not you're selling taxable goods and/or services.
And as five provinces have Harmonized Sales Tax, (Ontario, Nova Scotia, New Brunswick, Prince Edward Island* and Newfoundland and Labrador), you will want to voluntarily register for the GST. (It's also to your advantage to do so because as a GST registrant, you will be able to claim Input Tax Credits on the goods and services you purchase for use in your business.) Here's How to Register for the GST/HST.
*Prince Edward Island moved from a PST system to an HST system on April 1st, 2013; the combined HST rate in PEI is 14%, of which 5% will represent the federal part and 9% the provincial part.
General Tax Rules
The general rules for determining what taxes to apply to your Canadian e-commerce sale are:
1) If you are selling goods or services in your own province, the tax rules for your own province or territory apply. So, for instance, if your business operates in Ontario and you sell an item online to someone in Ontario, you would charge 13% HST on the sale.
2) if you are selling goods or services out of province, you charge the GST/HST rate based on where the goods are being shipped to. So, for instance, if your business operates in Ontario (HST 13%) and you sell an item online to someone in Nova Scotia (HST 15%), you would charge 15% HST on the sale.
3) If you are selling goods or services out of province to Alberta, the Northwest Territories, Nunavut or Yukon, which have no provincial sales tax, you would charge only GST (5%) on the sale.
Note that all of these examples assume that you are selling taxable goods and services.
But what if you sell something online to someone in BC, Manitoba, Saskatchewan, or Quebec? All four of these provinces have provincial sales tax.
The General PST Attitude
The consensus seems to be that the various provincial governments want out-of-province vendors to register for, collect and remit the applicable provincial sales taxes even when they are making online sales. Some provinces have enshrined this demand in legislation whereas others are just politely asking, pointing out that it would be a convenience to consumers in their provinces.
Online Sales in Canada: Which Taxes Do You Collect for Each Province?
As an online retailer accepting and shipping orders across Canada, the list of taxes you should be collecting and remitting on your online sales currently looks like this:
- BC - GST 5% and 7% PST (This came into effect April 1, 2013: see Does Your Business Need to Register for BC PST? for more information.)
- Alberta - GST 5%
- Saskatchewan - GST 5% and PST 6% voluntarily (unless is home province)
- Manitoba - GST 5% and PST 7%
- Ontario - HST - 13%
- Quebec - GST 5% and QST (Quebec Sales Tax) 9.975% (Note that as of January 1, 2013, the QST is no longer be charged on GST.)
- New Brunswick - HST 13%
- Nova Scotia - HST 15%
- Newfoundland & Labrador - HST 13%
- Prince Edward Island - HST 14% (note this came into effect April 1, 2013).
- Northwest Territories - GST 5%
- Nunavut - GST 5%
- Yukon - GST 5%
(*In your home province, registration for PST/RST is mandatory if you are selling taxable goods and/or services.)
This means that you should register as a Provincial Sales Tax Vendor with each of the provinces you will be doing business with and will be expected to collect and remit the sales tax accordingly.
Provincial Sales Tax (PST) and Out-of-Province-Vendors by Province
Here's what the provinces that have provincial sales tax have to say about online sales.
Provincial Sales Tax is called Retail Sales Tax (RST) in Manitoba.
Out-of-province businesses that sell/lease taxable goods to Manitoba purchasers are required to be registered as a vendor under the Act and to collect the RST if all of the following circumstances exist:
"1) The seller solicits the order for the sale in Manitoba, directly or through an agent, by advertising or any other means, e.g. in person, by telephone, mail, e-mail, fax, posters, television or newspaper advertisement targeted towards Manitoba customers,
2) The seller accepts orders originating in Manitoba to purchase tangible personal property. The order can be originated by telephone, Internet, e-mail, fax, letter or any other means from a location in Manitoba to the seller or agent located in or out of Manitoba,
3) The goods are acquired for consumption or use in Manitoba, i.e. not for resale, and
4) The seller causes the goods to be delivered in Manitoba, i.e., delivered by the seller, or shipped by the seller by common carrier, whether or not the goods are shipped at a specified cost to the customer" (RST Bulletin 004: Information for Vendors).
Saskatchewan also takes a hard line view on online sales. The answer to the question, "I am a non-resident vendor making sales into the Province. Do I have to collect tax on my sales?" is:
"All persons making taxable sales in Saskatchewan should become licensed and collect the tax. Non-resident businesses should consider becoming licensed as a convenience to their customers. If non-resident businesses don't collect PST at the time of sale, their customers are required to self assess and remit the tax" ( Saskatchewan Finance Provincial Sales Tax Common Questions).
The government of Quebec appears to assume that out-of-province vendors will register and collect and remit sales tax and that includes people making online sales. There is a reference in the Quebec Retail Sales Act to out-of-province businesses registering before selling taxable goods to Quebec residents (and once again, if the vendor has not collected the Quebec Sales Tax, purchasers are expected to report and remit the tax).
Isn't That a Lot of Extra Paperwork?
Yes, it is. And there’s not much you can do to get around all this additional paperwork and bookkeeping related to your online sales? Some Canadian-based online businesses limit the areas they ship to. An Ontario-based business, for instance, might only accept orders from and ship to customers in Ontario. Others only sell non-taxable goods and/or services.
The online sales picture is further complicated by the fact that goods and/or services that may be tax-exempt in one province may be treated differently in another. So take all the information above as a guide only and be sure to check with the Finance/Revenue Ministries of the individual provinces to ascertain whether or not you have to collect and remit provincial tax when you are shipping to customers who reside there. There are links to these in the Provincial Sales Tax section of this website.
When it comes to taxes, you can't afford to be wrong.