How to Navigate International Sales Tax for Canadian Businesses

Taxes- this word is enough to make people vulnerable to stress or make them anxious. If you own, operate, or manage a business in Canada, you should know that you need to collect taxes for the government. You should also know about international taxes and how to collect the same. Here’s a short guide on how to navigate international sales tax for Canadian businesses.

Understanding GST and HST

As a business owner or manager, you should know GST stands for Goods and Services Tax while HST refers to Harmonized Sales Tax. The latter is applied to provinces that have harmonized their sales tax with the GST of the federal government. The provinces are Nova Scotia, Brunswick, Labrador, Newfoundland, Prince Edward Island, and Ontario. GST, on the other hand, is imposed on the sale of taxable goods and services. It is levied in addition to retail or sales tax. You should know there is no provincial sales tax in Alberta or the three territories.

Which Business Must Register for GST/HST?

If a business offers taxable goods and services in Canada and its total taxable revenue is more than $30,000 in a single calendar quarter or four successive calendar quarters, it must register for GST or HST.

The taxable revenues of a business are worldwide revenues that a business earns from the supplies of goods and services. It can also be for zero-rated supplies (goods and services that are not taxable). They don’t include financial services, goodwill, and sales of capital property. A business must include the total taxable revenues of all the associations in this calculation.

How to Register a Business for GST/HST?

A business can register for GST/HST with the Canada Revenue Agency by completing and submitting Form RC1, Request for a Business Number, or using Business Registration Online. In cases of business located in Quebec, the registration needs to be done with Revenue Quebec.

Should a Business Collect Provincial Sales Taxes?

A business that is operating in HST needs to register only with the federal government. If a business sells taxable goods and/or services in Manitoba, Saskatchewan, Quebec, or British Columbia, it might need to register with the provincial government to collect the provincial sales tax.

Small vendors might get tax exemptions. They vary from province to province. It is calculated on the original price without applying the GST.

How to Charge Foreign and Out-of-Province Customers?

If your business sells a taxable good or service to an out-of-province customer, you need to remember that the sales tax applicable in the customers’ province or territory will be applicable. The exact details will depend on the regulations of the province and the level of interprovincial trade.

For international customers who prefer deliveries outside of Canada, you may not need to collect sales taxes. However, if they want deliveries in Canada, they must pay sales taxes and get a refund later.

What is an Input Tax Credit?

After a business is registered for GST or HST, it can recover the GST/HST it paid or owe for goods and services it has acquired, brought, or imported into a province while doing commercial activities. To ensure a claim is accepted, a business needs to provide supporting documentation so that you have proof if the claim is ever challenged.

When a business claims more tax credits than the taxes collected in a reporting period, the excess amount will be refunded to a business.

Here’s more information on GST and HST in Canada.

Also, here are 5 post-COVID cost-saving strategies.



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