| In trying to comply with tax laws for your e-business, | | | | I know of no cases of Americans being taxed on |
| you may find yourself falling down the rabbit-hole, | | | | the books or cars they bring with them when they |
| going through the looking glass, and attending a Mad | | | | come to live in Canada for about half the year.As a |
| Tea-Party.Common sense, logic, and fairness never | | | | Canadian registrant, one way you might legally |
| did apply | | | | avoid this silly March Hare is to explicitly state on |
| fully to the field of taxation but this is especially | | | | your website and invoice that use of such intangible |
| true of e-commerce transactions.1. Canada Customs | | | | personal property in Canada is prohibited (or |
| Welcomes You to Canada!Since I`m located in | | | | requires an additional fee and the payment of |
| Canada, let`s start here.Canada has what you might | | | | G.S.T.).3. When Imports Aren`t ImportsGoods shipped |
| call a national sales tax | | | | to Canada are subject to G.S.T. on |
| or a value added tax (VAT). This Goods and | | | | importation. Such tax is often assessed at the border. |
| Services | | | | But what if you are a Canadian registered for G.S.T., |
| Tax (G.S.T.) of seven percent is applicable to many | | | | selling to a Canadian customer but your supplier is in |
| Canadian transactions.Not only is it critical to determine | | | | a foreign country?Pretend that your Canadian |
| whether a taxable | | | | customer has bought a book |
| sale was made in Canada or not, but also where in | | | | from you from your Canadian website. Your drop ship |
| Canada. If it was made (or deemed to be made) in | | | | |
| any | | | | supplier is located in the United States and is |
| of the Harmonized Sales Tax (H.S.T.) provinces (Nova | | | | registered for G.S.T. You fax your order to the |
| | | | American company, and they, in turn, ship the book for |
| Scotia, New Brunswick, and Newfoundland and | | | | |
| Labrador), | | | | you (complete with Customs Declaration and their |
| a higher, fifteen percent H.S.T. rate applies. This | | | | G.S.T. |
| is because those provinces have allowed Canada to | | | | Business Number).Since they paid the G.S.T., you |
| collect their provincial sales taxes for them.As well, | | | | wouldn`t think you |
| each province and territory has its own | | | | would have to charge it again, would you? "Wrong!", |
| rules. Ontario charges eight percent retail sales tax | | | | smiles the Cheshire cat. Since you are a registrant |
| on many typical Internet transactions whereas Alberta | | | | located in Canada, you are required to charge and |
| | | | remit the G.S.T.But you are entitled to input tax credits, |
| has no provincial sales tax.Of course, this is only | | | | aren`t you? |
| scatching the surface. This | | | | In many cases, the answer is "No".It may be very |
| entire article is an over-simplification of a very | | | | difficult for you to satisfy the |
| complex subject. You will definitely need | | | | documentary and other technical requirements. As an |
| professional advice to help you through E-Commerce | | | | example, it is not uncommon for American suppliers to |
| Taxland.2. When Exports Aren`t ExportsIn Canada, | | | | |
| exports are "zero-rated" sales for G.S.T. | | | | absolutely refuse to give an invoice breaking down |
| purposes. This means that when you ship a product | | | | the |
| to | | | | G.S.T. or to allow you to be the Importer of Record. |
| someone outside Canada, you don`t charge G.S.T. | | | | This complicates their life unnecessarily and they |
| Yet, | | | | just don`t need the aggravation.There are relieving tax |
| you get to claim (or deduct from the G.S.T. collected | | | | provisions covering drop |
| by you) all the "input tax credits" (G.S.T. that you | | | | shipping, sales agencies, and other situations. In |
| paid for business purposes) to make that export. The | | | | many cases, unfortunately, the most practical solution |
| idea, I suppose, is to encourage exporting.However, if | | | | is to allow the tax to be paid twice.4. When You`re |
| you export products other than tangible, | | | | Subject to Tax Where You`re Not |
| physical goods, beware! There are many pitfalls to | | | | Subject to TaxIt makes sense that countries impose |
| watch out for.As one example, consider digitized | | | | a tax on sales and |
| products that you | | | | income made in their own jurisdiction. But does it |
| might sell from your Canadian website, such as | | | | make |
| e-books, downloadable software, or subscriptions to | | | | sense for Germany to tax sales made in the United |
| content. You would be considered to be selling | | | | States?In effect, starting July 1, 2003, the European |
| "intangible personal property". Unless your product | | | | Union |
| is also considered "intellectual property" (such as | | | | has done just that by imposing an online sales tax.This |
| software or e-books that you produced or have | | | | means that if someone from England buys an e-book |
| obtained | | | | from someone in the United States, the American |
| the rights for), you will have to charge G.S.T. The | | | | should |
| reason why, according to the Canada Customs and | | | | submit this tax. Of course, If the sale was to |
| Revenue | | | | someone |
| Agency, is that it COULD be used inside Canada, | | | | in Germany, the tax rate would be different.The |
| even if | | | | rationale behind this follows: Since countries |
| it isn`t.Say you sold a membership for accessing | | | | can`t collect sales tax on Internet transactions at |
| digitized | | | | their borders, the only way they can collect it (other |
| content (from various sources) on your Canadian | | | | than a self-assessment system) is with an online |
| website to a customer in the United States. Since | | | | sales |
| there are no restrictions as to where the intangible | | | | tax. Further, it is claimed that businesses in the |
| personal property may be used, and the property is | | | | European Union suffer a major competitive |
| not considered intellectual property (nor the | | | | disadvantage |
| provision of a service), the American customer is | | | | because they have to collect Value Added Tax |
| subject to G.S.T., even if he never comes to | | | | (VAT) but |
| Canada.Strangely, the same logic doesn`t apply when | | | | others don`t.I know what they mean. Welcome to the |
| an | | | | club!J. Stephen Pope, President of Pope Consulting Inc., |
| American buys a regular book (or a car) which he | | | | has been helping |
| COULD bring into Canada with him and use here. | | | | clients to earn maximum business profits for over |
| It is true that it is easier for Canada to assess | | | | twenty years. |
| such items at the border than in cyberspace, but | | | | |