Monday, October 26, 2009

E-commerce Provincial Sales Taxes

E-commerce has greatly increased many retail sales. Businesses, large and small, can now reach customers from coast to coast with relative ease, if they have a presence on the internet. However, a very interesting – and tricky - question arises from all these sales. Does a website vendor in one province selling taxable goods and/or services to customers in other provinces have to charge and remit other provinces' sales taxes?

Would that the answer were simple and straightforward. Just as taxes differ from province to province, so do the requirements for inter-provincial commerce.

Keep in mind that when dealing with tax related issues, it is better to err on the side of caution. Therefore, you should consult with your accountant and/or tax advisor to verify your own personal situation. Similarly, you can obtain detailed information from the finance/revenue ministries of the specific provinces in which you are conducting online business.

There are a number of factors that will determine your tax collection situation. As many small business owners are aware, you are exempt from charging and remitting the GST if you are a small supplier. However, even a business with small supplier status may have to register for GST if they conduct business in provinces that currently have HST (Harmonized Sales Taxes). The GST is part of the HST. Therefore, de facto, you will have to charge and remit provincial taxes in those provinces.

Some provinces have passed legislation requiring out-of-province vendors to register for their provincial taxes. Other provinces "suggest" registering.

Were you aware of the fact that if you, as a vendor, do not collect RST (retail sales tax) in a specific province, the responsibility falls onto the purchaser?

The tax issues are complicated and the requirements, and loopholes, are plenty. Before pursuing your sales in other provinces, check the tax requirements carefully with a qualified tax professional.
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