GST Changes for Businesses Using Fulfillment Centres

Canada imported goods worth $768 billion in 2019. The largest source of imported goods into Canada is from the United States. Understanding tax requirements can be complicated without the assistance of a legal professional. Selling goods in Canada through a fulfillment centre requires an understanding of basic tax obligations in Canada. At Jeremy Scott Law, we routinely assist businesses that need assistance with GST and HST matters in Canada. Consider reaching out to the experienced Canadian Tax Lawyer Jeremy Scott today by calling (902) 403-7201 for an initial consultation.

Fulfillment Centers and Canadian Taxes

With the increase in the use of fulfillment centres by online retailers – especially through Amazon’s marketplace – Canadian law is adapting to ensure the collection of certain taxes. While most Canadian businesses are familiar with the goods and sales tax (GST) and the harmonized sales tax (HST) applicable to goods and services sold/provided in Canada. However, non-resident businesses, also referred to as non-resident vendors, may not be as familiar with Canadian law. However, many non-resident businesses have become aware of recent changes associated with GST and fulfillment centres and are unsure how to remain compliant with these Canadian tax laws.

Non-Resident Vendors Must Collect and Remit GST/HST

Effect July 1, 2021, as reported by the Canada Revenue Agency (CRA), most non-resident vendors/businesses that generate revenue in excess of CAD 30,000 must register as a business subject to GST and HST taxation pursuant to a change in the law. Businesses that generate less than CAD 30,000 on goods sold in Canada may be considered small suppliers, and can registration is voluntary. Unfortunately, until recently, Canadian tax laws did not adequately address the ever-changing world that relies on fulfillment centres to ensure goods reach consumers throughout the country.

Responsibilities of Third-Party Fulfillment Warehouses

Third-party fulfillment warehouses have always been required to register for the collection of GST/HST. However, these fulfillment warehouses are now obligated to notify the CRA that they maintain a fulfillment warehouse. Additionally, third-party fulfillment warehouses must keep records of all non-resident vendors/businesses whose goods are stored in fulfillment warehouses for future sale to Canadian consumers.

The Canadian government has begun to investigate GST and fulfillment centres much more vigorously. As such, businesses should understand what is required of them under current Canadian laws. Jeremy Scott Law represents numerous businesses that may not know or fully understand their tax obligations in Canada. If you are a business – whether a non-resident or resident business – and you need guidance on complying with Canadian tax laws, Jeremy Scott Law can ensure you understand all of your legal and financial obligations.

The Rise of Amazon Sales in Canada

Amazon dominates online sales in many countries worldwide, and Canada is no exception. Canada is an attractive market for both Canadian sellers and non-resident sellers, many of which are located in the United States. Canada’s new mandate for non-resident sellers is not a new concept, as other companies have already implemented a similar system. Amazon should be all too familiar with laws concerning GST and fulfillment centres in Canada.

Prior to the change in Canadian law, non-resident online sellers could bypass GST/HST by not being considered to be carrying on business in Canadian. With the production and expansion of fulfillment centres, which are dominated by “fulfillment by Amazon (FBA),” non-resident vendors must identify the fulfillment centre as an additional place of business. In doing so, non-resident vendors become Canadian businesses for purposes of Canadian sales tax laws.

Fulfillment Centres: Overview of GST/HST Requirements in Canada

Do I Really Need a Lawyer to Help Me with a Business Tax Matter?

Many businesses and individuals handle tax matters independently without the assistance of a legal or tax professional. While some of these businesses and individuals may be well-versed in tax law by experience, far too many businesses and individuals attempt to comply with the law without understanding the full implications and nuances that may directly impact their specific situations. Matters concerning GST and fulfillment centres are one area where businesses often lack compliance, even if such non-compliance is unintentional.

Businesses that assume they are following the Canadian tax laws may receive an unpleasant surprise upon an audit by the CRA. Finding out that your business owes back taxes can be financially devastating. Businesses that choose to work with a Canadian tax lawyer are leaving the logistics to a professional who knows the ins and outs of tax law. Non-resident businesses unfamiliar with Canadian law are particularly vulnerable as they may rely on the fulfillment centre to handle all GST/HST matters.

Conduct Thorough Research Before Selling Goods in Canada

Canadian business (specifically businesses physically located in Canada and businesses that sell goods in Canada through fulfillment centres) should have a plan before embarking into a highly regulated industry. Online sales through Amazon seem like something any person or business have the legal right to do, but that is not always the case. Understanding GST and fulfillment centres in Canada is important to successfully sell goods to consumers located in Canada.

Having a clear business plan that accounts for taxes and all other legal obligations under Canadian law will help prevent the stress associated with an audit, which may be conducted at random. One way to minimize the anxiety and uncertainty associated with selling goods in Canada is to consider consulting with a Canadian tax lawyer before opening the door to customers or selling in Canada.

Contact a Canadian Tax Lawyer Today to Discuss Your Situation

If you are a business that generates more than CAD 30,000 in one year, you may be required to register to collect GST/HST on goods sold throughout Canada. Whether your business is located in Canada, or you are a non-resident vendor who uses a fulfillment centre to hold your goods until they are sold to Canadian consumers, you have legal obligations that will absolutely impact your company’s finances. At Jeremy Scott Law, our experienced tax attorneys provide legal representation to clients concerning various tax matters in Canada. To schedule a free consultation, contact our office today by calling (902) 403-7201.

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Please note the content above and throughout this website is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind.  I urge you to seek specific legal advice by contacting me (or your current legal counsel) regarding any legal issues you may face.  I do not warrant or guarantee the quality, accuracy or completeness of any information found on this website and will not be held liable for anything contained in this document or any use you make of it. Finally, accessing the information on my website does not create a lawyer-client relationship.