Breaking into the Canadian Market: A Guide for U.S. Sellers

Are you a US-based company looking to expand its customer base and find new customers in Canada in 2025? Or are you already selling to Canada and need to understand your liability?

Either way, this guide will walk you through everything you need to know.

Data shows that over 80% of Canadians were shopping online in 2020. Many people in Canada still shop for US-made goods. Which leads many US companies selling to Canada wondering how to collect sales tax on these transactions.

Sure, the two North American countries share many similarities when it comes to sales tax laws. But there are also many differences. For starters, the Canadian government imposes a national sales tax on businesses. They call it the Goods and Services Tax (GST). But that’s not all! You will also have to pay a Harmonized Sales Tax (HST) in some provinces. So, this blog will explain Canadian taxes in terms of HST, GST, and PST (Provincial Sales Tax).

Also, the Canada Revenue Agency (CRA) is the Canadian version of the IRS. So, an American business selling products to Canadian consumers will have to deal with this agency in terms of sales tax compliance. You should also keep in mind that complying with the US-Mexico-Canada Agreement (USMCA) is necessary for US companies selling in Canada. Now, let’s look into the sales tax implications for businesses based in the United States expanding northwards.

Key Considering for a US Business

Keep in mind that most goods and services are taxable supplies in the eyes of the law in Canada. If your sales exceed 30,000 CAD in the last back-to-back calendar quarters, the government will not recognize you as a small supplier anymore. Then you must register for a GST/HST sales tax account. You must also submit your GST returns on a monthly, quarterly, or annual basis dependent on the amount of revenue generated by your company.

The CRA and individual provinces will notify you of your reporting requirements. Your GSTs are due by the end of the next calendar month. Businesses with annual returns have to file within three months by the year-end.

Sales Tax Basics for US Companies in Canada

Around $600 billion worth of goods crossed the US-Canada border in the first three quarters of 2024. As an American business selling to Canada, you must understand the nuances of Canadian tax collection. Here’s a brief breakdown for you:

• GST: GST is a 5% federal tax, and it is applicable to most goods & services throughout the country. Yukon, Nunavut, Alberta, and the Northwest Territories only collect this GST tax.
• PST: PST is an additional tax on top of GST that is levied by provinces. The PST rate varies across provinces:
  • British Columbia: 7%
  • Manitoba: 7%
  • Quebec: 9.975%
  • Saskatchewan: 6%
• HST: HST combines PST and GST into a single tax for New Brunswick, Newfoundland, Nova Scotia, and Prince Edward Island (15%). However, Nova Scotia is going to reduce it by 1% for a total of 14% tax on April 1, 2025. In Ontario, the HST rate is 13%. HST and GST are submitted together.

Selling Products in Canada: Key Points

For sales tax purposes, businesses must register for GST/HST if they are “carrying on business” in Canada and exceed certain thresholds for revenue.

Here are some of the key considerations to determine if you need to register for a Business Number in Canada:

• You must register for a Canadian Business Number if you store inventory in Canada.
• If you’re a marketplace facilitator, you need to register for a GST/HST license if you have sales to Canadian consumers exceeding $30k CAD over a 12-month period (starting in July 2025).
• The Canadian government taxes cross-border sales of digital products, products sold to Canadians by non-resident vendors via fulfillment warehouses located in Canada, and temporary housing and rental accommodations sold online.
• Since eCommerce allowed US vendors to sell products or services to Canadians without “carrying on business” in a traditional sense, the government changed the laws regarding sales tax collection. Read on to the next section for more details.

U.S. Businesses Selling to Canadian Customers Online Without a Physical Presence in Canada

Since the eCommerce landscape in the US and Canada is very similar, many US companies find it quite incentivizing to sell to Canadian customers as well.

But US-based companies reaching out to Canadian customers must keep a few things in mind, such as the following:

• As explained above, GST is nationally applied, while HST combines GST with the sales tax levied by a province/territory. As an American-origin company selling to Canadians, you’re regarded as a non-resident business. So, you may have to register for GST/HST.
• As a non-resident eCommerce company, even if you lack a physical presence in Canada, you may fall into Canada’s sales tax net if you’re conducting business through a digital inventory of services that act like agents within Canada. So, you should determine if your foreign company meets the requirements for “carrying on business” in Canada or not.
• Lastly, you should look into sales tax compliance strategies by registering for GST/HST if you are establishing a tax threshold. Do talk to your Canadian customers about import duties as well as their tax burden for importing products from a US-based company (and the 15% withholding tax).

Understanding these aspects will allow your eCommerce business to make sense of the Canadian market even if you’re not physically present. Do use online selling platforms/websites supporting cross-border selling and localize content to efficiently engage with your customers in Canada. But the most important thing is to get regular updates on when Canada’s sales tax regulations change.

Provincial Taxes: What Your Business Must Know

Did you know that Canada is the top export market for 36 US states? If you want to sell goods and services in Canada, then you must learn about customs duties and the procurement process first. Keep in mind that selling to a foreign country has some complexities; some Canadian provinces levy their PSTs (provincial sales taxes) on top of GST, the federal tax. These PSTs have rules when it comes to foreign and non-resident vendors collecting sales taxes.

British Columbia

If your business is bringing foreign goods into British Columbia (BC), then you’ll pay PST even if your company doesn’t operate in this province. Let’s say your US based company sells taxable software or telecom services to Canadians residing in BC. Then you must register to collect PST on your taxable sales. Your sales will be taxable if you have a gross revenue of at least 10,000 Canadian dollars in the past 12 months from these sales.

Manitoba

American vendors selling their goods or services in this province need to register with Retail Sales tax through Manitoba’s TAXcess website. Also, vendors must collect the RST or Retail Sales Tax. Before January 2024, small businesses with annual taxable sales under 10,000 CAD were exempt from requirements from these. Now, the new threshold at which businesses have to register for and collect PST in Manitoba stands at $30,000 (Canadian).

Quebec

You should also look into the Quebec Sales Tax (QST) if you’re a foreign supplier operating in this province or distributing property here. That’s true if your taxable sales are over $30k in the past 12 months. This regulation applies to non-resident suppliers that don’t have a permanent establishment in Quebec.

Saskatchewan

All businesses operating in Saskatchewan must be licensed or registered with the Ministry of Finance for PST purposes. All operators of electronic distribution platforms and digital accommodation platforms are required to obtain a license within Saskatchewan.

Final Remarks

In conclusion, selling products in Canada as a US-based company offers opportunities to expand your reach, but it also requires a clear understanding of the country’s sales tax system. Remember, whether you’re an eCommerce company without a physical presence or a business looking to establish operations in Canada, staying on top of tax requirements and legal responsibilities is key to building long-term success as you expand your business into the Canadian market.