Aug 182009

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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