Review your Canada tax liabilities

Tax liability in Canada affects both Canadian and non-Canadian stores.

A store is considered Canadian if its address is located in Canada. A physical retail address qualifies a store as Canadian, even if the business isn't otherwise located in Canada. A store is considered non-Canadian if its address is not located in Canada, and it doesn't have any physical retail addresses located in Canada. Third-party warehouses or fulfillment locations don't qualify a store as Canadian.

If your store exceeds a sales threshold, then you might need to register to collect and remit Canada's Goods and Services Tax (GST). In some regions, GST is included in a Harmonized Sales Tax (HST). If you're registered to collect GST, then you're also registered to collect HST. In practice, this means that if you're registered for GST, then you need to charge the full HST in HST provinces. HST also applies to shipping charges on orders that you ship within Canada. Learn more about Canadian taxes.

Threshold periods in Canada

A threshold period is the amount of time that is considered when tax liability is calculated. In Canada, threshold periods are calculated by determining sales made in a quarter, or a period of three months. The quarters in a year are the following:

• January, February, and March
• April, May, and June
• July, August, and September
• October, November, and December

If your store is based in Canada, then generally you need to register for a GST/HST account if both of the following are true:

• You sell or lease taxable products or services.
• Your revenue from taxable sales in Canada is more than 30,000 CAD over the past four completed consecutive calendar quarters, or more than 30,000 CAD over the current calendar quarter.

If your store is not based in Canada, then generally you need to register for a GST/HST account if both of the following are true:

• You sell taxable products or services to customers in Canada, and fulfill those orders from a warehouse located in Canada.
• Your revenue from taxable sales in Canada is more than 30,000 CAD over the past twelve months.

If either of the preceding cases apply to you, then you might need to collect taxes on your sales, remit those taxes to the appropriate tax authority, and file regular reports with the tax authority. If your sales are lower than the threshold, then you don't need to register for a GST/HST account, and you don't need to collect or remit taxes.

Review your Canadian tax liabilities

After your store is open and has started to make sales, your sales and locations are automatically monitored to help you determine whether you have tax liablities.

Before you review your tax liabilities in Shopify, review the following considerations:

• Tax liability is displayed only for transactions that occur within Shopify. If you make sales outside of Shopify, then they aren't included.
• Tax liability is calculated using net sales, not gross sales. Net sales are sales minus refunds and tax.
• Sales aren't reflected immediately in your tax liabilities and might take a few days to update.

In some provinces, there's no minimum sales threshold, which means that a potential tax liability can be identified from your first taxable sale in that province. This currently applies to British Columbia, Manitoba, and Saskatchewan. For details about provincial registration requirements, including British Columbia's 10,000 CAD small-seller threshold, refer to Canadian taxes reference.

Canadian tax liability

As you expand, you might need new registrations to stay compliant. If you use Shopify Tax, then your sales and locations are automatically monitored to help you determine whether you have tax liabilities in Canada or in specific provinces. You'll receive notifications that inform you whether you have outstanding tax liabilities based on the information available in your store.

You can also review this information at any time in your Shopify admin.

Steps:

1. From your Shopify admin, go to Settings > Taxes and duties.

2. Click Canada.

3. In the Tax liability insights section, review your activity for notifications.

A status is displayed next to your registration indicating whether you're below, approaching, or have exceeded a registration threshold. If you're approaching or have exceeded a sales threshold, then consider registering to charge tax in that location. If you're not sure whether you should register, then consult a local tax expert or the relevant tax authority.

Canadian tax liability with Basic Tax

If you use Basic Tax, then you can review your tax liabilities in your Shopify admin by going to Settings > Taxes and duties, and then selecting Canada. Your tax liability is displayed above the regions where you're registered to collect tax. A progress bar is displayed to indicate how close you are to exceeding the threshold for collecting taxes in Canada.

If your sales in Canada indicate a potential tax liability, then the progress bar turns red. After you set up collecting GST/HST, the Canadian tax liability tracker isn't displayed.

Address your potential Canadian tax liabilities

If it's indicated that you have a tax liability in Canada, then you should register to collect GST/HST, and then set up your tax collection. If you're not sure whether the liablity tracker applies in your case, then contact a tax authority or a tax professional.

Steps:

1. From your Shopify admin, go to Settings > Taxes and duties.

2. Click Canada.

3. Click Collect in new region.

4. Select a region in which you are registered.

5. In the Sales tax ID, enter your tax number. If you applied for a tax number but haven't received it yet, then leave this field blank. You can update it when you receive your number.

6. Click Collect sales tax.

Voluntary GST/HST registration in Canada

You can register for taxes voluntarily, even if you don't meet the registration threshold. Registering for GST/HST before you're required to do so means that you must charge and remit GST/HST, but lets you to claim input tax credits on your business tax returns.

Canadian stores can voluntarily register for GST/HST if they sell or lease taxable products or services.

Non-Canadian stores can voluntarily register for GST/HST if any of the following are true:

• You engage in a commercial activity in Canada.
• You are regularly solicit orders for goods to be exported or delivered to Canada.
• You enter an agreement to supply services to be performed in Canada.
• You enter an agreement to supply intangible personal property (such as intellectual property) that meets any of the following criteria:
  • Is to be used in Canada
  • Relates to real property situated in Canada
  • Relates to goods that are ordinarily situated in Canada
  • Relates to services to be performed in Canada

If you voluntarily register to collect GST/HST, then you must do all of the following:

• Collect and remit GST/HST
• File GST/HST tax returns
• Stay registered for at least one year, unless you stop business activities
• Provide a deposit if you don't have a permanent establishment in Canada

To learn more about voluntary registration for GST/HST, refer to Register voluntarily for a GST/HST account.