Understanding Cross-Border Tax Compliance and VAT for Canadian Amazon Sellers

For Canadian Amazon sellers engaging in cross-border sales, understanding tax compliance and VAT/GST obligations is critical to avoid penalties and ensure smooth operations.

Key points for Canadian Amazon sellers regarding cross-border tax compliance and VAT/GST:

• GST/HST Registration and Collection:
  Canadian sellers must register for GST/HST if their sales exceed CAD $30,000 in a calendar quarter or over the past four quarters. Once registered, they must collect GST/HST on taxable sales to Canadian customers and remit it to the Canada Revenue Agency (CRA). Even if Amazon collects some taxes on your behalf, you must report all sales and remit the appropriate taxes.

• Input Tax Credits (ITCs):
  Registered sellers can claim ITCs to recover GST/HST paid on eligible business expenses, reducing their net tax payable.

• Marketplace Facilitator Rules:
  Amazon, as a marketplace facilitator, may collect and remit GST/HST or sales tax on behalf of sellers for certain transactions, but sellers remain responsible for compliance, including charging correct rates and filing returns.

• Cross-Border Selling Complexities:
  Selling internationally introduces additional tax obligations:

  • Exports from Canada are generally zero-rated for GST/HST, but sellers must maintain proof of export and detailed documentation, especially when using Amazon FBA with inventory stored in foreign warehouses.
  • US Sales Tax: Canadian sellers must navigate varied state-level sales tax laws, including economic nexus thresholds and registration requirements if they have inventory or significant sales in a state. Amazon may collect and remit sales tax in some states, but sellers may still have filing obligations.
  • European VAT: Selling into the EU requires VAT registration in relevant countries, compliance with local VAT rates, filing periodic VAT returns, and sometimes appointing fiscal representatives. The EU VAT system differs significantly from Canadian GST/HST and US sales tax systems, adding complexity.

• Digital Goods and Services:
  Digital products sold to Canadian consumers must include GST/HST regardless of the seller’s location. Online marketplaces like Amazon may be responsible for collecting these taxes on behalf of sellers.

• Customs and Import Duties:
  When shipping physical goods cross-border, sellers should be aware of customs duties, import taxes, and documentation requirements (e.g., HS codes, commercial invoices). Goods under CAD $150 are typically exempt from duties but still subject to GST.

• Recordkeeping and Filing Deadlines:
  Sellers must keep detailed records of all transactions and file GST/HST returns on time to avoid penalties and interest. Tax-compliant invoices showing registration numbers and tax rates are required.

• Amazon Tools and Support:
  Amazon provides tax reports to help sellers with filings and offers services like currency conversion and translation to assist with international sales compliance.

In summary, Canadian Amazon sellers must carefully track sales thresholds, register for GST/HST as required, comply with marketplace facilitator rules, and understand the tax regimes of target international markets (US sales tax, EU VAT). Maintaining thorough documentation and leveraging Amazon’s tools can help manage these complex cross-border tax obligations effectively.