Does your E-Commerce Business need to register for GST/HST?

If you have over $30,000 in revenue from goods or services sold in Canada, regardless of where you are located, you may need to register, collect and remit GST/HST.

First announced in the Federal Government’s 2020 Fall Economic Statement, the new rules on GST/HST for digital economy businesses came into effect on July 1, 2021. These new rules require foreign vendors as well as digital platform operators, such as online marketplaces, that do not have a physical presence in Canada to charge GST/HST to Canadian consumers. Sales taxes must be applied on the sale of digital products and services, goods sold by foreign vendors that utilize fulfillment warehouses within Canada, and accommodations provided through short-term accommodation platforms. These rules are only applicable if sales to Canadian consumers exceed $30,000 CAD over any 12-month period beginning on or after July 1, 2021.

There are two different GST/HST regimes: Normal Registration and Simplified Registration. Under the proposed simplified regime, non-residents would not be required to collect GST/HST from customers registered for GST/HST. However, they also would not be able to claim input tax credits to recover the GST/HST paid on expenditures. A business that is required to register under the simplified registration may, if it meets certain conditions, voluntarily apply to register for normal registration.

The four types of businesses that are impacted by these new rules include:

1. Cross-Border Digital Products or Services: Non-resident vendors or distribution platform operators that supply digital products or services may need to register under the simplified system.
2. Goods Supplied through Fulfillment Warehouses: Non-resident vendors/distribution platforms who make supplies of goods that are located in a fulfillment warehouse in Canada or shipped from a place in Canada to a purchaser in Canada may need to register under the normal GST/HST system.
3. Third-Party Fulfillment Warehouses:  These businesses should already be registered and are now required to notify the Canada Revenue Agency (CRA) that they are carrying on such a business. They must also maintain records regarding their non-resident clients and the goods they store on their behalf.
4. Short Term Accommodation Suppliers and Platforms: May now need to register under the normal GST/HST system.

In addition to these Federal GST/HST changes, there are also specific changes to provincial sales tax in British Columbia, Saskatchewan, Quebec and Manitoba regarding online marketplaces and accommodation platforms. These changes for digital and foreign vendors are wide-ranging and complex. A 12 month “transition period” for businesses that have taken reasonable steps to comply but cannot meet obligations will be addressed with a “practical approach” to compliance from the CRA. If you have any questions about the new GST/HST rules and if they may impact your business or, if you have any questions about other taxation matters, please reach out to your Bateman MacKay LLP Business Advisor.