Jeremy Scott Tax Law

Jeremy Scott Tax Law | Can You Outsource Canadian Sales Tax Compliance?

Many organizations are concerned about complying with relevant tax laws. One such concern is complying with Canada’s wide array of sales taxes. Some choose to outsource such compliance matters to a third party. If you are considering outsourcing Canada sales tax, consider contacting an experienced tax lawyer at Jeremy Scott Law first by calling (902) 403-7201. Jeremy Scott can advise you of the tax laws that apply to you.

Can I Outsource Canada Sales Tax?

There is nothing in Canadian tax legislation that prohibits businesses from outsourcing tax compliance to another entity. With today’s competitive job market, a lack of skilled tax practitioners and ever-changing tax rules, many organizations prefer to use a professional practitioner who is familiar with Canadian sales tax laws assist them with understanding their legal rights and responsibilities. 

Below are a sample of the issues which might make it prudent for an organization to outsource its tax compliance function.

Canadian Sales Tax Requirements

The Government of Canada requires certain types of businesses to:

  • Register for Goods and Services Tax (GST)/Harmonized Sales Tax (HST)
  • Charge and collect the applicable tax
  • Complete and file a sales tax return
  • Remit sales tax they collected (net of any offsetting credits)

Who Collects GST?

The Government of Canada requires most businesses in Canada to collect GST/HST if they meet the following two requirements:

  • Make taxable sales, leases, or other supplies in Canada
  • Are not a small supplier

A small supplier is one that does not make more than $30,000 in revenue from worldwide taxable supplies in one calendar quarter over the last four consecutive calendar quarters.

It is important to note that there are also a range of new rules applicable to online marketplaces and other sales made through online platforms.

Canadian Provincial Sales Tax Requirements

Several Canadian provinces also implement their own sales tax regimes, and have registration and collection requirements that must be met.

What Types of Sales Tax Are in Canada?

Canada imposes different sales tax, depending on the area. Taxes you should be aware of include:

  • Goods and Services Tax – GST is a national tax. It may appear separately as a tax or a part of HST.
  • Harmonized Sales Tax – HST combines the province-specific sales tax and the national GST. Ontario, Nova Scotia, Prince Edward Island, Newfoundland, New Brunswick, and Labrador use the HST system.
  • Provincial Sales Tax Tax – Provinces that do not use the HST system may have a specific provincial sales tax rate. In these provinces, businesses must collect both the PST and GST.

Are there other Sales Taxes in Canada?

Yes there are a wide range of sales taxes that apply in Canada.  For example, there are national and provincial taxes that potentially apply to items such as fuel, tobacco and alcohol.  There is a new federal sales tax on luxury items (such as cars and boats that exceed a specific sales price).  There is even a sales tax on specific sugary beverages in at least one province.

I am a non-resident of Canada.  Do I Charge Canadian Sales Tax?

Until recently, loopholes often resulted in non-resident vendors or digital platforms not collecting GST or HST for transactions involving a Canadian buyer. This had the effect of giving foreign businesses a competitive edge over domestic businesses that were used to taxing these transactions properly.  

Now, the rules regarding GST/HST and most provincial sales taxes apply to all goods and services used in Canada, whether they are supplied by a Canadian business or foreign vendor and regardless of their method of supply. If a business makes taxable supplies to Canadian consumers, they will be required to register for and collect sales tax, even if they do not otherwise business in Canada. This applies to such businesses as:

  • Suppliers of digital services
  • Online platform operators
  • Online suppliers of goods that fulfill through a warehouse
  • Suppliers of accommodations made through a digital platform
  • Nonresident vendors
  • Distribution platform operators

Each of these entities may have different responsibilities regarding the collection of GST and HST. For example, distribution platform operators must consider their own sales as they are the responsible party for “qualifying supplies” they sell on their platform. Qualifying supplies include those that are in fulfillment warehouses or other locations in Canada and sole on distribution platforms by unregistered third-party vendors. If the distribution platform operator anticipates reaching $30,000 over a quarter, it should register for HST and GST. The distribution platform operator should register for HST and GST and remit payments.

How Much Canadian Sales Tax Do I Need to Charge?

In order to determine how much GST and HST a business needs to collect, the business must determine which customers have a usual place of residence in Canada. GST and HST apply if the customer’s usual place of residence is in Canada and at least two of the following are located in Canada:

  • The customer’s home address
  • The customer’s billing address
  • The customer’s IP address
  • The customer’s bank or payment information
  • SIM card

The current GST or HST rates are:

  • 15% in Labrador, New Brunswick, Newfoundland, Nova Scotia, and Prince Edward Island
  • 13% in Ontario
  • 5% in other locations

Provincial sales tax rates vary by the province.

How Can We Help?

The knowledgeable legal team at Jeremy Scott Law can help fulfill a company’s legal needs and help keep it in compliance with ever-evolving tax regulations. The team provides a customized solution to international businesses, which can include:

  • Tax preparation and return filing
  • Taxability determination
  • Audit assistance
  • Tax registration
  • Identification of collection and reporting obligations for GST/HST and PST.
  • Tools to assist the management of compliance obligations
  • Determination of the appropriate GST or HST rates for products or services in relevant jurisdictions
  • Assistance with finance teams to help with the adaptation and updating of financial and reporting systems to further ensure compliance with the tax rules

We can answer any questions you have and address any concerns that arise during the process. We want to help you understand your tax responsibilities and help build a platform so that you can easily outsource your Canada sales tax obligations.

Contact a Knowledgeable Canada Sales Tax Lawyer for Help

If you are considering outsourcing Canada sales tax compliance to a third party, be sure that you select someone with the necessary knowledge of the current tax rules and systems in place that may impact your business. The legal team at Jeremy Scott Law is here to assist you with all of your compliance matters. You can learn more about your tax obligations by calling (902) 403-7201.