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Canadian Tax Services
For many growing U.S. companies, expansion into Canada through the distribution of goods and services or through physical locations can be a natural fit. Canada’s proximity, similarities in consumer buying habits and availability of a ready workforce allow for potential ease of entry. However, there are considerable differences in how Canada and the Unites States apply, collect and remit sales taxes.
Federal sales taxes
Canada levies a Goods and Services Tax (GST), which is a value-added tax that applies to the supply of most goods and services at a rate of 5 percent. Some provinces have harmonized their provincial sales taxes with the GST, resulting in Harmonized Sales Tax (HST), a value-added tax that also applies in those provinces.
Unlike a retail sales tax, a value-added tax such as GST/HST generally applies to all supplies in the supply chain, while a retail sales tax typically applies only to the end user of a good or service. However, GST/HST registrants are generally entitled to claim refunds of GST/HST incurred in the course of their commercial activities. Thus, GST/HST does not represent a cost for most businesses.
Businesses supplying goods and services to the Canadian marketplace or those seeking to expand into Canada need to understand the GST/HST rules to confirm whether registration is required. Once registration is in place, those entities need to ensure that tax is properly collected and remitted and that all available refunds are claimed.
Provincial sales taxes
GST/HST is only one piece of the Canadian sales tax puzzle. Some Canadian provinces still have a separate sales tax, each with its own legislation. The Quebec sales tax (QST) is a value-added tax applicable only in the province of Quebec. For the most part, the QST rules have been aligned with the GST/HST rules, but some differences remain.
The provinces of British Columbia, Saskatchewan and Manitoba each levy their own separate retail sales taxes. Each of these provinces has its own distinct legislation, rules and registration and filing requirements.
How RSM can help
As a result of the complexities of the federal and provincial tax legislation, companies carrying on business in Canada face a number of challenges. The different jurisdictional taxing requirements often result in a need for third-party expertise to assist in navigating these challenges.
RSM’s Canadian sales tax specialists have extensive experience consulting with companies on business activities in Canada and providing sales tax recovery reviews, advisory services, risk assessment analyses and audit support services. In addition, we can advise on any other project specifically requiring Canadian sales tax expertise.
If your company is doing business in Canada and pays Canadian federal or provincial sales taxes, RSM’s Canadian sales tax professionals can evaluate your tax position to potentially limit your exposure and maximize your profitability.
Constructive distributions resulting from bargain sales between related parties triggered withholding tax and penalties.
U.S. companies doing business in Canada need to understand the Canadian sales tax landscape and what it means for their business. Learn more here.
Taxpayers may not be aware that their business activities with Canada may give rise to a reporting requirement, or even a tax liability.