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!
I figure you have a good reason, but I have to ask: why not get the Canadian merch made by a company in Canada?
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.
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.
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 😉
[…] online merchants won’t sell to Canadians: http://www.laurenwood.org/anyway/2009/08/18/problems-importing-into-canada/ grmf. […]
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.
Normally when I order stuff from the US, I just have to bite the bullet and pay the extra charges that they ding me with. Canada Customs has a form that you can fill out where you’re supposed to get reimbursed for the fees you had to pay to get your package that you should not have had to pay, but whenever I’ve filled out those forms, I’ve never gotten my money back anyhow. Canada Customs are just a bunch of crooks.
Several times, when I’ve bought items at a discount price, they’ve opened my package, decided it must be worth more, despite the copy of the receipt that’s inside the box, and then they charge me taxes based on the price they think I *should* have had to pay for the item!
It’s extremely annoying!
A few weeks ago, I ordered something from the US, and I decided to use the “BorderFree.net” checkout, because it said it was easier for Canadians. Well, after a while, I called the company I ordered it from. They gave me a tracking # so I could see the status of the item being shipped from their office to the BorderFree depot. Then, it sat at the BorderFree depot for quite a few days before being shipped, and then never arrived. I have a tracking # for it with Canada Post, and so when I checked to find out why it hasn’t arrived, I found out that some stupid buffoon at BorderFree didn’t put my house number on the package, and so all they had was the city & street. So I don’t even know WHERE my package is right now. All I know is that if they were trying to deliver it, they’d have to by psychic to find my house.
My full address IS on the receipt from BorderFree, so it’s not like they didn’t have my complete address to begin with! What kind of idiot doesn’t know that you can’t find a person in a large city just by putting a street name on the box?
Hi Everyone!
I am about to open an online store for kids in Canada. I live in Canada and I have an online store that is geared to those in the USA and everything is drop shipped and it works great. 3 years ago when I started this US store there were hardly any companies in Canada that would drop ship and now there are quite a few. I am going to work with these companies that drop ship for the new store but I want to sell some of the product in the USA in my new store. I am so confused about all the options out there. The way I want to do it as well is I want to have a rough idea what the duty and shipping charges would be before I price the items in the store so I can include some of them in the price. I didn’t think this was going to be a problem what I thought I could do is have either Fed Ex or UPS ship and act as the broker at the border and I would pay the duty/shipping/ taxes etc. on my credit card so that the customer isn’t charged anything additonal. I have talked to UPS and I find it confusing… they seem to think this will work … that my customer in Canada will not be charged anything else if I pay it. from the reading above I’m not sure this will work. This is a bit of an old post so maybe things have changed. Has anyone else had any luck doing something similar?
I’d call your local provincial tax office and ask their advice. They should know what options are available. Good luck!
Hello Tracey — did you get your answer. I’m interested in expending our brick and mortar store to include on line — via a drop ship model — we are in health and beauty products. You mentioned there are several drop chip companies in Canada now„ how do you find them?
Thanks
I am currently starting a online business from canada also wanting to dropship some of my products. when i applied for my gst # i asked how to work the problem and was told as long as i am listed as the importer on record the customer won’t be charged the taxes twice.As i havent had to do this, i have not tried this yet.