GST/HST for online sellers in Canada: registration, place of supply and platform rules

Three points cause most of the GST/HST trouble we find in online sellers' books. The $30,000 small-supplier test counts every taxable sale worldwide, including exports taxed at 0%, so a seller shipping mostly to the US can be over the threshold without ever having charged a customer a cent. The rate you charge on a Canadian order follows where the goods are delivered, not where you sit. And a marketplace collecting tax on some of your orders is not the same thing as you being registered.

Below we take the rules in the order you will meet them: registration, rate, platform collection, exports, input tax credits, provincial taxes and the US.

Registration: the $30,000 test includes your zero-rated exports

You must register for GST/HST once your worldwide taxable supplies exceed $30,000 in a single calendar quarter or across the last four consecutive calendar quarters. "Taxable" includes zero-rated supplies, so the order shipped to Ohio counts even though the rate on it is zero. Exempt supplies and sales of capital property do not count.

Cross the line within one quarter and you are a registrant from the sale that put you over; cross it over four quarters and you remain a small supplier until the end of the following month, with registration due within 29 days after that. Our answer on when you have to register for GST/HST covers the timing in detail.

For most online sellers we recommend registering before the threshold. If a meaningful share of your sales are exports, registration costs you nothing on those orders and lets you recover the tax on inventory, packaging, software and advertising. Illustratively, $6,000 of Ontario-taxed purchases in a quarter carry $780 of HST that an unregistered seller simply absorbs.

The case for waiting exists only when nearly all your customers are Canadian consumers who cannot recover the tax, and even then the threshold arrives sooner than most sellers expect. See should you register before $30,000.

Which rate to charge: goods follow the delivery address

For physical goods the place of supply is the province where the goods are delivered or made available to the buyer. Ship a parcel from Brampton to Calgary and you charge 5% GST; to Moncton, 15% HST; to Montreal, 5% GST plus QST if you are registered for it. Your own province matters only when the goods are picked up or delivered there. The shipping address on the Shopify, WooCommerce or marketplace order is the evidence, so make sure your tax settings apply rates by destination rather than a flat Ontario rate on everything, the single error we correct most often in new client files.

Digital products, downloads, online courses and most services follow a different rule: the customer's usual address, meaning a consumer's home address or a business's billing address. An Ontario seller of digital planners charges 13% to a Toronto buyer, 5% to a Vancouver buyer and nothing to a buyer in Texas. Our answer on which province's tax to charge out-of-province customers has the full matrix, and GST/HST on digital products and courses covers the intangible side. Rates below are as at the time of writing; confirm before you change your settings.

Platform collection: Amazon or Etsy remitting tax does not register you

Since July 1, 2021, marketplace operators have been required to collect and remit GST/HST on qualifying sales made through their platforms by sellers who are not registered. In practice Amazon.ca and Etsy collect Canadian tax on orders from unregistered sellers and report it in their tax documents; once you register and enter your GST/HST number in your seller account, the collecting duty shifts to you and the platform stops. Three consequences follow:

• Being collected-for is not being registered. The platform rule settles who remits on those orders; it does not remove your own duty to register once your sales pass $30,000, and our reading is that platform-facilitated sales count toward your threshold like any other. Confirm with the CRA if your position depends on it.
• Enter your number the day you register. Until you do, the platform keeps collecting under its own account while you are also liable as a registrant, which produces tax charged twice on the same order and a correction nobody enjoys.
• Keep the platform's tax reports alongside your own. Tax the platform collected before you registered is not your collected tax and does not belong on line 105 of your return, but you need the report to prove it. Tax collected after you registered is yours and must reconcile to your payouts.

Sales through your own Shopify or WooCommerce store are never covered by platform collection; those are yours from the first order. The interaction gets more involved for sellers using Amazon FBA warehouses in Canada and the US at once, which is why our Amazon seller accounting and Etsy seller accounting pages treat the platforms separately, and do Etsy sellers need to register for GST/HST answers the most common form of the question.

Exports are zero-rated, but only with proof

Goods you ship to a customer outside Canada are zero-rated: you charge 0% and still claim full input tax credits. The condition is that you, or a carrier on your behalf, export the goods and can show it. Keep the shipping label and tracking history, the customs declaration your shipping software generated, and the order record with the foreign address.

Where a foreign buyer arranges pickup inside Canada, zero-rating depends on stricter conditions, so route those orders through your own carrier where you can. Services and digital products supplied to non-residents are also generally zero-rated, subject to exceptions for services tied to Canadian real property or performed for someone present in Canada. Our answer on charging GST/HST to US customers lists the exceptions.

Input tax credits: inventory, imports, ads and fees

Once registered you recover GST/HST paid on business purchases through input tax credits on line 108. For online sellers the large ones are:

• Inventory bought in Canada, at whatever rate your supplier charged.
• Import GST. Goods from overseas suppliers attract 5% GST at the border, charged by your courier or customs broker; that 5% is claimable, so keep the customs accounting document or courier duty invoice, not just the supplier's invoice.
• Advertising and software. Google, Meta, Shopify and most major platforms charge GST/HST to Canadian businesses; enter your registration number in each so the invoice shows the tax.
• Marketplace fees. Seller fees billed to a Canadian seller generally carry GST/HST; check the fee invoice. Stripe and PayPal processing fees are exempt financial services with no tax to claim.
• Packaging, third-party logistics, domestic courier charges, and 50% of meals.

Larger invoices must show the supplier's registration number, and a credit must be claimed within four years. Sellers with under $400,000 of annual taxable sales can also consider the quick method, which replaces itemized credits with a reduced remittance rate; it suits some sellers with high margins and few taxable inputs, but rarely those who import or export heavily, because zero-rated sales sit outside the calculation while the credits are given up. See how input tax credits work and the quick method.

Provincial sales taxes and US sales tax are separate systems

Four provincial registrations to watch

GST/HST registration covers the HST provinces and the GST everywhere else. It does not cover British Columbia's PST, Saskatchewan's PST, Manitoba's RST or Quebec's QST, each administered by the province with its own rules for out-of-province sellers. As at the time of writing, British Columbia requires a Canadian seller located outside BC to register once its BC sales of goods exceed $10,000 in a 12-month period; Saskatchewan and Manitoba expect registration from out-of-province sellers who solicit and deliver goods into the province with no meaningful threshold; and Quebec requires a seller elsewhere in Canada to register under its specified system once sales to Quebec consumers pass $30,000 over 12 months.

Confirm each province's current rule before you cross it, because the thresholds and definitions have changed more than once since 2019. Marketplaces generally collect these provincial taxes for unregistered sellers too, which helps, but again does not register you.

US sales tax is state by state

Nothing above touches US sales tax, which is levied by states rather than a federal body and turns on economic nexus thresholds, commonly $100,000 of sales into a state in a year. Amazon and Etsy collect it under marketplace facilitator laws, but your own Shopify sales into the US are your responsibility once you cross a state's threshold, and US income tax is another question again. Our guide to US sales tax for Canadian e-commerce sellers takes that side, and our e-commerce accounting hub brings the Canadian and US pieces together.

What defensible records look like

A sales tax return you can defend has four reconciled numbers each period: gross sales by destination, tax you collected, tax the platform collected, and input tax credits with supporting invoices. In QuickBooks Online or Xero that means a destination-based tax code on every sales line and platform payouts recorded gross with fees as expenses, never netted.

Filing frequency is annual up to $1.5 million of taxable sales, quarterly to $6 million and monthly above that, with quarterly instalments once annual net tax reaches $3,000. The sellers who find this easy are the ones whose books were set up for it; the ones who find it painful are rebuilding two years of platform reports in March. Our post on the GST/HST mistakes small businesses make lists the other errors we correct, and recording Amazon settlements in QuickBooks shows the payout entry.

Sources: CRA — When to register for and start charging the GST/HST · CRA — Which rate to charge · CRA — GST/HST for digital economy businesses.