Imports By Exporters Of Processing Services
Generally, the GST or the federal part of the HST is payable on any goods imported into Canada for further manufacture or processing. However, registered Canadian businesses may not have to pay the GST or the federal part of the HST on goods they import that are owned by a non-resident person when the goods are imported for processing in Canada and subsequently returned to the non-resident owner.
Processing includes the alteration, assembly, manufacture, modification, production, packaging, or repackaging of the imported goods.
Certain restrictions apply. The Canadian processor has to be a GST/HST registrant. The processor cannot be closely related to the non-resident owner of the imported goods to be processed and cannot have ownership interest in the imported goods or the processed by-products. The goods must be exported from Canada within four years of the date on which they were reported and accounted for on importation.
You must apply for authorization to import the goods without paying the GST or the federal part of the HST. For more information, contact your tax services office. To obtain the address and phone number of your tax services office, go to Non-resident GST/HST enquiries.
What Is A Sales Tax Nexus And How Does It Affect E
A sales tax nexus is what determines the relationship between your business and the state, or taxing jurisdiction. For brick-and-mortar stores, determining this is typically easy: the physical presence of the store in that state established the relationship between the taxing jurisdiction and the business.
However, the Supreme Court ruling in South Dakota v. Wayfair Inc. changed how e-commerce businesses charge and collect sales tax. The decision, made in June 2018, enabled states to charge sales tax to out-of-state sellers, which means you don’t need a physical presence in a state to pay sales tax. In South Dakota, the state can charge sales tax to any business that delivers more than $100,000 of goods or services or totals 200 transactions on an annual basis.
Now, with goods theoretically available to all customers in all 50 states, e-commerce businesses may not know how much sales tax to charge, if any.
“This is a major change in the sales tax world,” said Judah Fish, CEO of Saltwater Tax Group.
If your small business mails three $15 products to a customer across the country, you don’t need to worry much about these sales tax laws. It’s highly unlikely any state will create a law where purchases that small result in paying a sales tax, but businesses selling larger amounts need to take note.
Filing And Remitting Due Dates
Monthly and quarterly filers
If you have a monthly or quarterly reporting period, you have to file your GST/HST return and remit any amount owing no later than one month after the end of your reporting period.
If you have an annual reporting period, you usually have to file your return and remit any amount owing no later than three months after the end of your fiscal year.
Your GST/HST payment is due by April 30 if all of the following conditions are met:
- you are an individual with business income for income tax purposes
- you file annual GST/HST returns and
- you have a December 31 fiscal year end.
Although your payment is due by April 30, you have until June 15 to file your GST/HST return.
In some situations, you may have to file a GST/HST return before leaving Canada. For example, if you give a performance where you sell admission fees, you have to file a GST/HST return and remit any GST/HST due before you or any of your employees leave Canada. You have to do this even if your reporting period has not yet ended.
A registrant listed financial institution that has an annual reporting period has six months after its fiscal year end to file its return and remit any amount owing.
As an annual filer, you may have to pay quarterly instalments. If so, they are due no later than one month after the last day of each fiscal quarter. For more information, see Instalment payments.
Recommended Reading: How Can I Make Payments For My Taxes
Exemptions Based On Identity Of Buyer
States cannot tax sales that are made to the federal government or its agencies, state governments or their agencies, cities, counties or other local jurisdictions. Also exempt, in most states, are sales made to nonprofit, charitable, religious and educational organizations if the sales are specifically for the organizations nonprofit purpose.
The Internal Revenue Service determines a business nonprofit status, and the states follow that guidance when deciding if an organization must pay sales tax. Information for how a business can apply for nonprofit status, and also what businesses are listed can be found on the IRS website.
To be considered a charitable tax-exempt nonprofit, the organization must come under one of these categories:
- Preventing cruelty to children or animals
Definition Of Tangible Personal Property
The term tangible personal property means any kind of physical personal property that has a material existence and is perceptible to the human senses . Sales of tangible personal property and certain services are subject to sales tax when delivered in New York State.
Examples of taxable tangible personal property include:
- raw materials such as wood, cloth, or metal
- manufactured items such as jewelry, furniture, machinery, and appliances
- motor vehicles, gasoline, oil, and chemicals
- computers and prewritten computer software
- artistic items such as paintings, sculptures, photographs, and craft items
- animals, trees, shrubs, and flowers and
- certain grocery store items such as soda, beer, candy, and bottled water.
Read Also: What Does Locality Mean On Taxes
Make Sure You’re Monitoring Sales Tax Rates In All States
Following the South Dakota v. Wayfair decision, most states changed their tax law. For example, California’s changes to its e-commerce sales tax regulations took effect on April 1, 2019. This was major news, as any business selling over $100,000 worth of goods online to California customers was subject to the California use tax. Having 200 or more separate transactions into California also subjected online sellers to the tax.
California updated its e-commerce sales tax requirements in February 2020, less than a year after the first adjustments were made, and now requires businesses that make “three or more sales in a 12-month period” to hold a seller’s permit. This change underscores just how important it is for businesses that sell their goods online to continually monitor state sales tax regulations.
Many states have followed the monetary guidelines set forth in the Supreme Court case. Other states won’t always enact the exact standards as South Dakota, but you can use those numbers as a guide to prepare in the event that your state has not set laws yet. If you exceed that hypothetical threshold, you should closely monitor the sales tax laws in that state to remain compliant.
Key takeaway: Preparing for shifting e-commerce laws involves investing into resources, such as software, that can help you monitor law changes in all 50 states and make adjustments to your sales-tax-collection processes accordingly.
Find Out If You Have To Register For A Gst/hst Account
You generally cannot register for a GST/HST account if you provide only exempt supplies.
You have to register for a GST/HST account if both situations apply:
- You make taxable sales, leases, or other supplies in Canada
If you are a selected listed financial institution that is making a reporting entity, consolidated filing or tax adjustment transfer election, see GST/HST Notice 265, GST/HST Registration for Listed Financial Institutions .
Use the following sections to determine if you are a small supplier to find out if you have to register.
- if you are a small supplier
- if you have to register for the GST/HST
- your effective date of registration
Small supplier limit calculation for most businesses
Example 1 Did not exceed the $30,000 threshold amount in four consecutive calendar quarters
On February 1, 2020, you started a business that sells candles. You made the following sales:
Calculation Example 1
You are a small supplier in 2020 because you did not exceed the $30,000 threshold in four consecutive calendar quarters. You are still a small supplier in the first quarter of 2021, unless you exceed the $30,000 threshold in that one quarter.
Example 2 Exceed the $30,000 threshold in one quarter
On January 1, 2020, you started a consulting business. You made the following revenue from your taxable services.
Calculation Example 2Calculation Example 3
Recommended Reading: How Much H And R Block Charge For Taxes
Filing Requirements For Occasional Or Isolated Sales
A casual sale is an occasional or isolated taxable sale by a person who is not in the business of selling taxable property or services. People who make casual sales from their home and have no intention of making sales on a regular basis as a business do not have to register for sales tax. These occasional sales must be made from your home, and the purchaser must pick up the item at your home.
Even though you may not have to register for sales tax, you must collect sales tax from the buyer and send it to New York State if the item is taxable, unless the sale meets the special rules for a garage sale discussed in Tax Bulletin Sales from Your Home . Use Form ST-131, Sellerâs Report of Sales Tax Due on a Casual Sale, to remit tax due on a casual sale.
Example: You are retiring and moving into a smaller home. You decide to sell your dining room set which includes a table, chairs, and hutch for $800. You list the furniture in your local newspaper for sale. The furniture is taxable, but this sale does not require registration for sales tax purposes because it is an isolated one-time sale. However, it does not meet the special rules for garage sales because the selling price of the items exceeds $600. You are required to collect sales tax on the selling price of the items and send it to New York State with Form ST-131.
Records & Reporting Sales Taxes
Documenting taxes collected, including in your invoices, is vital for a small business and is part of the record you must maintain to make reporting and paying taxes legal and efficient. While requirements vary from state to state, all will want records of the tax collections your business has made in some form. Be sure you know what your state and local requirements for reporting are some may drill down as deep as requiring receipts from each sale. Your state will also have a schedule for reporting the sales tax your business has collected and how the reporting must be done. This, like everything else regarding sales taxes, varies from state to state.
Don’t Miss: How Much Does H & R Block Charge To Do Taxes
Events And Supplies That Do Not Qualify For The Drop
The drop-shipment rules do not apply to common carriers that take possession of goods for the sole purpose of shipping the goods. In all cases, fees for shipping goods are subject to the GST/HST based on the normal GST/HST rules that apply to such services. The transfer of the physical possession of the goods to the carrier for transportation and delivery to another person is considered to be a transfer of physical possession of the goods to the person to whom the goods are to be delivered that person can elect to follow the drop-shipment rules.
For more information, see GST/HST Memorandum 3.3.1, Drop-Shipments.
When You Are Obligated To Collect Sales Tax Online
The basic rule for collecting sales tax from online sales is:
- If your business has a physical presence, or nexus, in a state, you must collect applicable sales taxes from online customers in that state.
- If you do not have a physical presence, you generally do not have to collect sales tax for online sales. However, in June of 2018, the U.S. Supreme Court issued a ruling that will likely change this exemption to collecting sales tax. States are expected to begin collecting sales taxes regardless of having a physical presence in the state.
A physical presence means that you have some business facility in that state. It could be any type of business operation, such as:
- A storefront
- A warehouse
Recommended Reading: How To File Missouri State Taxes For Free
Economic Impact Of Ecommerce
So how much does ecommerce disrupt brick and mortar business? In 2019, the global business-to-consumer ecommerce market was valued at over $3 trillion. Its projected to grow at a rate of 7.9% through 202,7 according to Grandview Research.
In 2020, ecommerce accelerated even faster than expected as a result of the COVID-19 pandemic and quarantine measures to contain it. As consumers attempted to limit social contact and stay at home, online shopping took off like never before.
Charging Sales Tax To Canadian Customers
Disclaimer: This is just an opinion from ShipHype and should not be taken as tax advice. Please speak to a qualified accountant for further clarification as they will have up-to-date and accurate information.
Taxes are an important component for anyone selling goods or services online. It is helpful to understand how they work and its vital to ensure youre collecting taxes where you are obligated by law.
Read Also: How Can I Make Payments For My Taxes
Basic Rules For Applying The Gst/hst And Qst
Click Coronavirus Disease to see whether the measures adopted by Revenu Québec apply to the information on this page.
The most common consumption taxes for Québec residents are:
- the goods and services tax , which is calculated at a rate of 5% on the selling price and
- the Québec sales tax , which is calculated at a rate of 9.975% on the selling price excluding the GST.
The GST and QST are collected on the sale of most goods and services.
The harmonized sales tax replaces the provincial sales tax and the GST in some provinces.
When The Customer Picks Up The Product
It doesn’t matter if your customer picks up their product if you operate in an origin-based state because all your sales are subject to your state’s sales tax anyway. But it’s considered to be a delivery if you’re in a destination-based state and the customer picks the product up at your business location. The destination of the sale would be your business location, so you would not charge the customer an out-of-state sales tax.
You May Like: Where Is My Tax Refund Ga
How Sales Tax Works For Remote Sellers
Earlier, we touched on how economic nexus is determined: youre considered to have nexus in a state because you had a certain dollar amount of sales in that state, or have a certain number of sales transactions in that state.
However, there are a number of other reasons remote sellers may find they have nexus in a state. Well go through the rules of each state later, but first lets review the most common types of nexus.
If you have any of the following arrangements as a remote seller, you may have nexus in multiple states, even if you have not hit the economic nexus threshold in that state. Keep in mind that the exact definitions and fine print differ with each state. Check individual state regulations if these rules apply to you.
How Does Nexus Work In Practice
Here are three common sales tax nexus examples:
There is some good news for Amazon and other online marketplace sellers. Most states with an Amazon fulfillment center have passed marketplace facilitator laws. These laws require that marketplaces who handle sales on a third-party online sellers behalf collect and remit sales tax on that sellers behalf, too. More on that below.
You May Like: Michigan Gov Collectionseservice
The Taxjar Api Ensures You Collect The Right Amount Of Sales Tax From Every Customer Every Time
With TaxJars vast library of product tax codes , all you need to do is attach the right code to your service, and we handle the rest. Sell CPA services in New Mexico and New York? We ensure you collect sales tax from your New Mexico customers , and never collect sales tax from your New York customers You never have to worry about over- or under-collecting sales tax, or paying sales tax out of your bottom line.
Lost Tax Revenue On Internet Sales
Sellers with no physical presence in most provinces don’t have to charge sales tax. But as out-of-province online sales grow, provincial tax agencies want to protect local businesses that provide both jobs and tax revenue. In its 2018 budget, Quebec announced plans to make sales tax collection mandatory for all online sales in 2019, even for out-of-province sellers. BC and Manitoba have already enacted similar measures for out-of-province sellers. It’s important to understand how tax obligations on internet sales are changing. Tax agencies want to enforce tax collection by tracking online sales. It makes sense to prepare for these changes.
Read Also: Efstatus Taxact Com Return