Four Canadian provinces have provincial sales taxes that that are separate from the federal GST/HST. Each provincial sales tax presents unique concerns. What should U.S. businesses know about Quebec, British Columbia (BC), Saskatchewan and Manitoba?
In Canada, the federal Goods and Services Tax / Harmonized Sales Tax (GST/HST) applies to taxable supplies in all provinces at 5%, 13% or 15% depending on the jurisdiction. Click here for a link to our article on non-resident GST/HST registration. In addition to the GST/HST, four provinces (Quebec, BC, Saskatchewan and Manitoba) have a provincial sales tax, each with its own legislation, registration and returns. Businesses that are registered for a provincial sales tax are required to collect GST as well as provincial sales tax on all taxable supplies in that respective province. Below is a brief summary of the issues to be considered regarding registration for provincial sales tax in each province.
Quebec Sales Tax
The Quebec Sales Tax (referred to as QST or TVQ) is a value-added style sales tax levied at the rate of 9.975% on taxable supplies made in Quebec. The QST has its own legislation and requires separate registration and returns but the QST rules have generally been harmonized with the GST/HST rules. The determination of whether a U.S. business is required to become registered for QST purposes is similar to the analysis that is done when reviewing the GST/HST registration requirements. QST registration is required for every non-resident person who:
- Is not a small supplier (i.e. taxable supplies exceed CAD$ 30,000);
- makes a taxable supply in Quebec;
- In the course of a business carried on in Quebec
Generally, QST registration is required where the level of activity in Quebec is sufficient to be considered to be carrying on business in Quebec. We note that a non-resident can register on a voluntary basis even if it is not required.
Carrying on business
As noted above, QST registration is required where a non-resident makes a taxable supply in Quebec in the course of a business carried on in Quebec. A non-resident can be carrying on business in Quebec for QST purposes even without a permanent establishment in Quebec. The factors to be considered when determining whether a person is “carrying on business” in Quebec are the same as those for GST/HST purposes. Click here for a link to our article on GST/HST registration. The factors to be considered in determining whether a non-resident person is carrying on business in Quebec for QST purposes include:
- The place where agents or employees of the non-resident are located;
- The place of delivery;
- The place of payment;
- The place where purchases are made or assets are acquired;
- The place from which transactions are solicited;
- The location of assets or an inventory of goods;
- The place where the business contracts are made;
- The location of a bank account;
- The place where the non-resident's name and business are listed in a directory;
- The location of a branch or office;
- The place where the service is performed; and
- The place of manufacture or production.
Expanded QST registration requirements
In addition to the registration requirements above, new expanded QST registration requirements were introduced in 2019 for non-residents who make e-commerce transactions to Quebec customers.
Under the new QST rules, a non-resident with no physical presence in Quebec and who would not otherwise be considered to be carrying on business in Quebec is still required to become registered for QST if they make the following supplies to certain Quebec customers through a website or web-based sales platforms:
- Digital products such as streaming services or computer software;
- Operators of digital distribution platforms;
- Operators of websites facilitating sales of goods in Quebec; and
- Non-residents selling goods through a fulfillment warehouse located in Quebec or elsewhere in Canada.
Retail sales taxes
The sales taxes in the remaining three provinces, British Columbia, Saskatchewan and Manitoba are single stage retail sales taxes similar to the sales taxes seen in many U.S. states. As with U.S. sales taxes, certain entities and certain categories of goods and services are exempt. The concept of the retail sales taxes is generally the same for the three provinces. However, there are also many differences, particularly in the list of services that may be taxable in one province but not in another. For example, legal, architectural and engineering services may be subject to tax in one province but not another, depending on the situation.
Non-residents of BC, including online businesses that are located outside BC (either in or outside Canada) must be registered for BC sales tax if they do all of the following:
- Sell taxable goods to customers in BC;
- Accept orders (by telephone, mail, email or Internet) from customers located in BC; and
- Hold the goods in inventory in BC (e.g. use a BC warehouse).
- Deliver goods into BC, whether physically or electronically, or through a third-party courier.
Companies that do not hold inventory in BC but deliver goods to customers in BC may also be required to become registered for BC PST.
Saskatchewan and Manitoba
Businesses located outside Canada that make retail sales in Saskatchewan or Manitoba may be required to become registered for the respective provincial sales tax in these provinces. “Retail sales” include the delivery of tangible personal property (“TPP”) by businesses that do not otherwise carry on business in either province. Non-residents are required to become registered for sales tax in Saskatchewan and Manitoba if they do the following:
- Solicit orders in these provinces through advertising or other means (including telephone, internet or email);
- Accept orders originating in either province;
- Sell the TPP for consumption or use in either province; and
- The businesses cause the TPP to be delivered to a location in either province, regardless of who pays the shipping costs.
“TPP” generally refers to goods but also includes computer software, data, information or material that is transferred, transmitted or distributed by landlines, wires, fiber-optic cables or satellites.
U.S. companies looking to expand their goods and/or services offerings into Canada should be sure to review these Canadian sales tax issues. If any of the above scenarios applies to your activities, you may be required to become registered for some or all of the Canadian sales taxes discussed above.