HST is coming to Ontario and British Columbia July 1, 2010. Are your e-commerce stores ready? There are implications for small business and online retailers. HST is not simply PST + GST. For the purpose of this article we’ll stick to what online retailers need to know for selling goods between provinces, i.e. if/when/how the taxes are collected and remitted.
Real World PST
Outside the CRA website, in the real world, the small online vendor does not collect the out-of-province customer’s PST. Most provinces ask that you be registered to collect their PST if you are going to sell into their province. It’s not enforced and the provinces have differing levels of encouragement. In most cases if you buy something from out of province, and you were not charged your home PST by the vendor, you are supposed to self-assess and remit provincial tax; we can safely doubt this is well-observed.
But if the retailer has an operation, an office, warehouse, etc in the province where his customer resides, he must collect the PST of this province where the supply is made. Most small businesses however have one centre of operation, especially online retailers, so these businesses are generally collecting PST on sales only in their province of registration.
You Must Collect HST
If you are registered to collect GST, you must collect HST. Reading the CRA HST policy here begs for real world examples:
“A supplier in Quebec agrees to design the Web site of a company in Ontario. The service is performed entirely in Quebec. The business address of the recipient obtained by the supplier is in Ontario. Since the business address of the recipient is in Ontario, the supply of the service is proposed to be made in Ontario and HST would apply at a rate of 13%.”
OK this is not an e-commerce transaction. But we read on to makes it clear rule 1 above is applicable when “a person in a participating province buys goods in a non-participating province and brings these goods into a participating province.” — E.g. an online sale.
GST/HST/PST (and QST?)
Here are the provincial tax rates as of July 1, 2010. With the rules above governing the pragmatic PST situation of out-of-province sales remittance, and the understanding that HST is always collected out-of-province, now the small online business needs only this chart, and hopefully an e-commerce package with the flexibility to accommodate.
Note: According to Wikipedia, “On April 6, 2010, the Nova Scotia government restored the HST rate to 15%”. A Government of Canada (CRA) document updated April 30 2010 indicates “the HST rate in these three provinces is 13%”, referring to Nova Scotia, New Brunswick, and Newfoundland and Labrador. Wikipedia is wrong in this case. We trust the gov.ns.ca website press release FROM April 6, 2010, explaining “Effective July 1, the Harmonized Sales Tax (HST) will be restored to 15 per cent.”
But where is my Customer?
Interesting that we have to hunt for this information… most e-commerce applications require a home address, and allow a different address for the delivery. Which address matters with respect to determining applicable tax? The answer is the home address. It matters where the customer/business is registered, not where the package is heading.
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Which address matters with respect to determining applicable tax? The answer is the home address
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are you sure about this?… is the home address the same as billing address…and not the shipping address….any online documentation to back this up??…
Right. Home address is billing address, “where the customer/business is registered, not where the package is heading.”
This can’t be right.
I have an online store based only in BC. I have a customer in Ontario that is from the UK and wants a product. He ordered, on his card with billing address in the UK, but wants me to ship to him at his current residence in Ontario. Are you saying I don’t have to charge him HST.
Can’t be right. I billed him anyways.
LOL Whats with our government, zero business sense if you ask me.
That’s a tricky one! I’m concerned about the important detail “at his current residence in Ontario”. I’ve seen nothing in the law indicating we respect where the customer is originally from or where his credit card bill is delivered. While he’s in Ontario he’ll be paying Ontario HST on nearly everything he buys, and your product is no different.
I have a web based store in BC, HST rate 12%, if I am selling/shipping product to another HST province do we charge our HST rate or theirs?
You would charge HST for the customer’s province.
What if I don;t charge for the product and only charge for shipping?
I’m in BC, I sell free samples to ON, but charge for shipping. what tax is applicable?
I shipped Via canadapost and the only charged GST. should I do the same?
Bo
I am an Alberta resident and frequently shop at an online store based out of Ontario. Before completing my latest purchase, I noticed on the invoice I was to be charged for the 13% HST. This can’t be right, shouldn’t I only be paying GST?
You are right. The Ontario store should be respecting Alberta tax, just GST, not their (new) HST when selling to you. It’s not uncommon for e-stores to have taxes misconfigured.
Okay what about one of my customers whose head office is in Quebec but my business and his shipping address are in Ontario? So I’m shipping from an Ontario address to an Ontario address but billing a Quebec address.
And as an aside, I have filled out our HST return for the quarter and as far as I can tell the government has a total mess on their hands. I enter a sales total, HST billed and HST paid and rebate the difference. There is no indication of what percentage was paid to what province, how much HST was 12% or 13% or just GST to none HST provinces. Somebody is losing out.
Following the rules outlined here, we find the head office and billing address of the customer as Quebec; you are looking at GST and QST; you likely aren’t registered to collect QST, so GST only is the answer, provided the goods you are selling are GST taxable.
P.S. Thanks for your website and the excellent advice.
Ok Let’s try these two ones:
Company XYZ is 100% based in province of QC.
A) XYZ is invoicing Customer ABC with HQ based in AB but is requested to ship the merchandise to one of ABC’s warehouses located in ON. GST (AB) or HST (ON)?
B) XYZ is invoicing Customer DEF with HQ based in QC but is requested to ship the merchandise to
one of DEF’s warehouses located in ON. GST/QST (QC) or HST (ON)?
Thanks for your opinion.
If we sell a product to the United States or within Canada and our office (e commerce website) is located in Ontario, but the product is being shipped from our North American Distributors warehouse in Atlanta, GA, USA, how do we change the applicable sales tax to our customers in the United States or in Canada?
Thanks and I hope you can help!
Hi, I am a freelance editor in Ontario and bill all my clients HST for my services. What do I bill a client who lives and operates his business in Montreal? Can I bill him HST?
Thanks for your help.
If you are billing a client business registered in Quebec, and you are not registered to collect the provincial QST, you would be charging the GST portion only.
Hello,
I understand that if my Quebec-based online store sells to a client in Ontario, I must charge 13% HST, however, who do I give the collected tax to? All 13% to the federal government? I’m not registered with the Ontario tax entity. I guess I don’t have to give anything to Revenue Quebec? Way to go Federal Government! Making managing small businesses, EVEN MORE difficult!
I’m planning to launch a subscription based service (most comparable to website hosting). I’m a registered business entity in Ontario. Service will be availalbe worldwide. Currently server & service is physically in Ontario (server might be moving to the US). There are no goods being transferred. I’m not physically performing the service (it is all automated) the webserver is. Initially I wasn’t going to ask where the user is from as it is not needed for my business model, only item I wanted to collect is their email address and charge via paypal. So I’m wondering charge HST for all canadians (based on their honesty as they checkoff they are) and no TAX for everyone leso that doesn’t say they are canadian? Product will primarily be marketed to candians. (i would leave price the same, just price for candians is HST inclusive)
Hi Justin
If you can help, I would be SO GRATEFUL!
If I am an ecommerce store in the US and want to sell to Canada, what are the taxes I need to charge my customer, and what do I need to pay to the US / Canadian govt?
Thanks in advance
If my client is registered in Quebec and they ask me to ship to BC and my client is paying for the freight can you tell me what taxes I should be charging on the invoice to them.
Also, If my client is in Quebec and wants me to ship to BC but I am paying the freight and charging my client on their invoice, what taxes should I be charging?
Thanks
Heather
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/gnrl/hst-tvh/gds-eng.html
I found this information about when to be charging for HST, one example it gives is:
A bank orders cheques to be shipped by the supplier directly to all its branches situated across Canada. HST applies to the supply of cheques that are shipped to the branches of the bank that are situated in the participating provinces. GST applies to the supply of cheques that are shipped to the branches of the bank that are situated in the non-participating provinces.
So it is extremely clear (and see the other examples) that the HST must be added (yes, even by an AB store) if the seller will be shipping the items to a participating province. I was surprised to read this. Another note is that NS calculates GST first and then HST on the total plus GST.
I have a question regarding hst. My company (say, in BC) wants to ship some supplies to a customer in Ontario. The supplies are going to be provided free of charge, we are not billing them for the supplies, but we are going to bill them back for the shipping charges.
What HST do I charge when I bill them back for the shipping charges? BC or Ontario?
Hi Justin,
Thanks for your helpful advice and comments. I have read through this entire page, including all the comments here at the bottom, and while some questions are similar in nature to mine I haven’t seen the answer I need yet!
I am about to launch my e-commerce website. I’m located in BC so I will operate it out of BC.
I am using a distributor via drop shipping who’s located in the US.
As the business (me) is located in BC, do I charge all the applicable taxes for Canadian provinces (HST and GST only if applicable?) and none for any of the US states?
Thanks
I am a resident and ctizen of Canada with a website that markets only to US customers and is supplied from a US supplier. What US tax laws apply to me?
I have been looking into offering a service online. When users make use of this service I do not require them to provide me with the billing or delivery address. It is a complete online transaction and service is also delivered online.
Am I now required build a ‘geo-filter’ to identify what province the user comes from and what taxes i should be charging them?
Hi,
What about selling link space on a website? Should tax be added on the invoice? (for a QC corp)
Thanks