As dawn breaks across Canada's vast landscape, numerous Chinese cross-border e-commerce sellers are preparing to tap into this promising market. However, the path to success is paved with complex tax regulations that serve as significant barriers to entry. Understanding Canada's GST, HST, PST tax systems and adapting to Amazon's Marketplace Tax Collection (MTC) rules has become crucial for international sellers.
Canada's Dual-Layer Tax System
Canada's tax framework consists of federal and provincial components, requiring sellers to carefully distinguish between different tax obligations. At the federal level, the Goods and Services Tax (GST) applies nationwide at a standard 5% rate for most goods and services. The Harmonized Sales Tax (HST) combines GST with provincial sales taxes (PST) in participating provinces, with rates varying by region. Ontario implements a 13% HST, while Prince Edward Island charges 15%.
Provincial taxes present additional complexity. British Columbia and Manitoba levy a 7% PST, Saskatchewan charges 6%, and Quebec operates its own Quebec Sales Tax (QST) at 9.975%. Notably, HST-participating provinces don't require separate PST payments, while non-HST provinces apply GST and PST concurrently.
GST Registration Requirements
The Canada Revenue Agency (CRA) mandates GST registration when a business's global annual taxable sales (including both B2B and B2C transactions) exceed CAD$30,000. Sellers below this threshold may voluntarily register to claim input tax credits, potentially optimizing their cost structure.
Registration requires obtaining a Business Number (BN) as a tax identifier. Applicants must submit corporate documents including business licenses, legal representative identification, power of attorney authorization, GST registration forms, and store information. Once registered, businesses must maintain compliance for at least one year before considering deregistration.
Amazon's Marketplace Tax Collection Rules
E-commerce platforms have implemented compliance mechanisms, with Amazon's MTC policy (effective July 2021) significantly altering tax responsibilities. For domestic Canadian transactions, Amazon automatically withholds GST from sellers without registered GST numbers, while registered sellers must self-report taxes.
The financial implications are substantial: unregistered sellers bear full sales tax liabilities (e.g., 13-15% HST), while registered sellers pay only net taxes after input deductions. This creates significant cost advantages for compliant businesses.
Provincial Tax Breakdown
| Province/Territory | Tax Type | Rate | Notes |
|---|---|---|---|
| Alberta | No PST | 0% | Federal GST 5% only |
| British Columbia | GST+PST | 5%+7% | |
| Manitoba | GST+PST | 5%+7% | |
| New Brunswick | HST | 15% | |
| Newfoundland and Labrador | HST | 15% | |
| Nova Scotia | HST | 15% | |
| Ontario | HST | 13% | |
| Prince Edward Island | HST | 15% | |
| Quebec | GST+QST | 5%+9.975% | |
| Saskatchewan | GST+PST | 5%+6% | |
| Nunavut | GST | 5% | |
| Northwest Territories | GST | 5% | |
| Yukon | GST | 5% |