I’ve often wondered why so many U.S. online companies won’t sell to people living in Canada. It’s a smaller market, to be sure, but not trivial, in fact bigger than most U.S. states. I’ve recently discovered a large part of the reason – Canada’s import procedures and tax laws.
Tim’s blog costs a reasonable amount to keep going, so we thought it might be nice to come up with some way to defray some of that. His photos are popular, so we figured to do something with that, preferably using drop shipping so we don’t have to invest in an inventory of things that might not sell at all. The idea, after all, is to make a little money, not have inventory sitting around that nobody wants. With drop-shipping we collect the money, send the order to the company creating the item, and they ship it directly to the end customer.
I try to do the right thing in terms of paying taxes etc, so I started phoning the relevant agencies to find out the answer to one big question: how do I make sure the end customer isn’t charged the Canadian sales taxes (GST for Canada, PST for BC) twice, while still allowing the company to ship to them directly?
The answer is: you can’t. Not legally, anyway. By law, if I sell something to someone who lives in Canada, I have to collect the GST (and PST if they live in BC). When the item comes across the border into Canada, if it’s shipped directly to the customer, they have to pay it again. Legally I can’t not collect it on the grounds that they will pay it, and legally they can’t not pay it on the grounds that I already collected it from them. I could engage a customs broker to do this, but they’re far too expensive for me to contemplate at this stage. The only legal way for the customer to avoid paying the taxes twice is if I have the item shipped to me, and then I ship it on to them. Which increases the cost of shipping, increases the delivery time, and negates much of the point of drop shipping.
Now I’m trying to figure out the options. There’s the option of selling only to U.S. people, which seems weird since I live in Canada. There’s the option of telling Canadians that their delivery will take a lot longer, since it has to be sent to me and then I’ll send it on (and I do have other things to do with my time). There’s the option of recommending they use some service that does this for them. And there’s the option of giving up on the whole endeavour. None of those options are particularly appealing.
Helpful comments and suggestions are welcome!
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I figure you have a good reason, but I have to ask: why not get the Canadian merch made by a company in Canada?
Sadly, I have no alternatives (other than Sam’s suggestion), but I sympathise deeply. Having lived now in Canada, the US, and the UK, online shopping is *fantastic* in the US and the UK, but was nothing but pain in Canada. It’s not helped by the fact that Amazon.ca is practically useless. I wonder if these sorts of regulations are what have prevented a viable online retailer of any sort from emerging in Canada?
Long ago there was a service called BorderFree that was great (one price including shipping, no hidden costs). I see that Canada Post has something: http://www.borderfree.net/en/business/index.jsp I don’t know if it is applicable, but something to look into.
Sam, sometimes the best manufacturer is in the U.S. Well, best if you don’t count the border problems. And sometimes there isn’t a lot of choice (i.e., there may not be any in Canada), depending on what you want to do. I’ll be hunting around more for Canadian options though, and maybe change the merchandise plan.
A bunch of years ago, I sent some books to a Canadian friend that I thought she would like from Amazon.com. Big mistake. She wound up with a fat bill to pay. Similarly, New York is now requiring just about anyone anywhere (notably Amazon.com) who ships merchandise to NY to collect the taxes on it, regardless of whether they have a physical presence or not.
Someone ought to make the case that taxing books contravenes the Charter of Rights and Freedoms, because it limits the freedom of expression guaranteed there. “The power to tax is the power to destroy.” (John Marshall, the first U.S. Chief Justice)
These days amazon.com collects the taxes due in advance of shipping to Canada, which does make life easier and delivery quicker. In BC, books are exempt from the provincial sales tax (PST), which also helps
The important thing is not whether it’s “against the law,” but rather what the sanctions are for breaking the law. I suspect there aren’t any, as long as someone pays the tax somewhere, one time. So ignore it. Ultimately, paying the tax, once, is really what the law says. Paying it twice is just a procedural way to make sure that the tax is paid (at least) once.
They probably just want to make sure that the tax is paid the one time, and there’s no way for them to know at the border whether it has been. This is like when software is licensed cross border. There is a withholding tax of 20 percent (or 10 percent, depending on treaty) that needs to charged be withheld by the licensor. The licensee can then apply for a refund at the end of the year by filing a tax return in the country in question. It’s a hassle, but it’s the only way the government can ensure the company doesn’t ignore the tax, which they could do with impunity, being a foreign corporation.
you can legally ship to Canada without having the Canadian customer payy tax twice. it is a program many US companies and online retailers use called the Non-Resident Importer option. But beware, there are Canada Customs Brokers out there that will charge up to 1200.00 to set up as one. This is a cash grab. I can tellyou how to set up and increase sales without all hte upfront fees. or if you ship via Fedex or UPS, they canset you up as one. You just need tolearn all hte charges toinclude and how to create the shipping document a little differently. I hope this helps!
Yes, this is common issue for US drop ship companies. I suggest you find a Canadian drop shipping company. You will avoid all the importing issues.
There are some Canadian drop shipping companies available. Go to the small business center. You can access the database of all registered companies
Next year, the HST will be a big headache for consumers, but for Canadian small businesses it’s a tax saving. You can claim all the Canadian taxes back (right now you can not claim the PST)
In my view An enterprising person is one who comes across a pile of scrap metal and sees the making of a wonderful sculpture. An enterprising person is one who drives through an old decrepit part of town and sees a new housing development. An enterprising person is one who sees opportunity in all areas of life. To be enterprising is to keep your eyes open and your mind active. It’s to be skilled enough, confident enough, creative enough and disciplined enough to seize opportunities that present themselves… regardless of the economy.
I have purchased online many times, and sometimes I have had to pay the GST twice. The fix for this is simple. When you pick up the package at the post office, there is a custom form attached, Form E14, CBSA Postal Import Form. On the back is a form to file an informal dispute. All you have to do is mail the form to the address provided, along with a printout from the online sale showing that GST was paid on the purchase, and the government will send a refund cheque for the amount collected at the post office. I have done this many times. A small inconvenience to get access to products that are not available in Canada.
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