How to Start an E-commerce Business in Canada
Start an e-commerce business in Canada: register the business, choose between your own store and a marketplace, set up payments, and handle GST/HST by the province where each order is delivered.
GST/HST on Online and Digital Sales in Canada
GST/HST on online and digital sales in Canada splits three ways: the simplified regime for non-resident digital sellers, the normal regime for goods and for Canadian sellers, and platform operators deemed to make the supplies they facilitate.
Applies in: across Canada
Online sales look like one activity from the checkout screen. For GST/HST they are three. A non-resident selling a streaming subscription, an e-book, or a software licence to a Canadian consumer is in the digital-economy measures, with a simplified registration regime created for exactly that case. A non-resident selling a physical good stored in a Canadian warehouse, or shipped to a Canadian buyer, is in the normal regime, and the simplified regime is not open to that seller at all. A Canadian seller, whether selling digital products or physical goods, is in the normal regime from the start. The platform sitting between the seller and the buyer can change who must charge the tax, because a platform operator that facilitates the supply can be deemed to have made it. This guide follows those three splits. It does not repeat the goods-selling mechanics — provincial PST and QST registration, checkout configuration, and business registration in each province — which the guide on selling to other provinces covers.
Step 1: Name what is being sold
The CRA's digital-economy overview names three measures, and the first step is to place the sale in one of them. The first is cross-border digital products and services: taxable digital products or services, such as online music streaming or traditional services supplied online, sold by non-resident vendors or non-resident digital platform operators to Canadian consumers and to Canadian entities not registered under the normal regime. The second is the supply of qualifying goods in Canada: qualifying tangible personal property, including goods delivered or made available in Canada, such as goods located in a fulfillment warehouse or goods shipped to a purchaser in Canada under certain circumstances. The third is platform-based short-term accommodation: taxable supplies of short-term accommodation situated in Canada, supplied by a person not registered under the normal regime, or facilitated by an accommodation platform operator.
The category decides the regime, and the regime decides the registration route, the place-of-supply rules, and whether input tax credits are available. A seller that sells both digital products and physical goods can be in two measures at once, with the digital sales under the simplified regime and the goods sales under the normal regime, and must keep the two streams accounted for separately. A seller that misclassifies a digital sale as a goods sale, or the reverse, registers under the wrong regime and charges under the wrong place-of-supply rules.
Step 2: Name the seller and the platform
The seller's residence and the platform's role decide who registers. A non-resident vendor selling digital products or services to Canadian consumers, a non-resident digital platform operator acting as a direct vendor, and a distribution platform operator facilitating such supplies through a platform are all within the simplified regime. A distribution platform operator is defined by control or payment: a person, other than the supplier, that controls or sets the essential elements of the transaction between the vendor and the purchaser, or, if no such person exists, a person involved in collecting, receiving, or charging payment and transmitting it to the vendor. A classified-advertising website that only allows vendors to list goods, and a person who is solely a payment processor, are not distribution platform operators.
The platform's role matters even for a seller who is not registered. The CRA's overview states the consequence directly: even if a seller is not required to register and charge GST/HST, its customers may have to begin paying GST/HST to a distribution platform operator or an accommodation platform operator on supplies facilitated through a digital platform. Where a registered platform operator facilitates a supply by a non-resident vendor, the operator is deemed to have made the supply and must charge and collect the tax, whether the vendor is registered under the simplified regime, registered under the normal regime, or not registered at all. The seller should therefore confirm, in the platform's tax settings or seller agreement, who is charging tax on each sale, and keep its own registrations for the sales the platform does not collect on.
Step 3: Name the customer
The digital measures are aimed at supplies to Canadian consumers. A consumer, for this purpose, is a recipient who is not registered under the normal GST/HST regime. The collection rule has a specific carve-out: a business or platform is not required to collect GST/HST on a supply if the recipient is registered under the normal GST/HST rules and provides its GST/HST registration number to the business or platform when the supply is made. If the recipient does not provide the number at that time, the business or platform is required to collect the tax. The practical consequence for a digital seller is a checkout field: the registration number must be collected at the time of the supply, not added afterwards, and a business customer that withholds its number is charged tax like a consumer.
For a Canadian seller under the normal regime, the customer analysis is the place-of-supply analysis in the charging guide: services are taxed where the customer is, goods where they are delivered, and a supply to a recipient outside Canada can be zero-rated where the export conditions are met. The digital measures do not change that analysis for Canadian sellers; they add a parallel analysis for non-resident sellers and platforms.
Step 4: Pick the regime
Simplified registration is available for cross-border digital products and services and for platform-based short-term accommodation. Normal registration is the route for the supply of qualifying goods. A business required to register under the simplified regime may, if it meets certain conditions, voluntarily apply to register under the normal regime, but it cannot be registered under both types at the same time. The choice has a direct cost consequence, covered in Step 6: the simplified regime gives up input tax credits, and the normal regime keeps them.
Registration under the simplified regime is made only through the non-resident registration web form. The threshold for the simplified regime is $30,000 in taxable supplies of digital products or services to consumers in Canada over a 12-month period, made or expected to be made, with supplies facilitated by a registered distribution platform operator that is deemed to have made the supply excluded from the vendor's threshold. For a platform operator, the same $30,000 threshold counts the supplies it facilitates, including supplies by non-resident vendors to Canadian consumers. The measures took effect on July 1, 2021, so a non-resident digital seller that has been selling to Canadian consumers since then without registering should check its 12-month totals now, not at the next year-end.
Step 5: Find the customer's province
Where the supplier or platform operator is registered under the simplified regime, the special place-of-supply rules for digital products and services apply. Those rules place the customer in a province using residence indicators, and where the usual place of residence has not been determined under the earlier rules, the supplier may use a method the Minister has allowed. Where the supplier is registered under the normal regime, the normal place-of-supply rules apply instead, and the same supply can therefore carry a different province, and a different rate, depending on the regime the supplier holds.
The rate follows the province: 5 percent GST in a non-participating province, and the HST rate in a participating province. A non-resident digital seller under the simplified regime charges the rate for the customer's province, not the rate for the seller's home country, and not a single blended rate. The seller needs at least one reliable residence indicator at checkout — the CRA's rule sequence turns on the indicators the seller actually holds — and should record which indicator placed each customer, because the province determination is the fact the return rests on. This guide does not reproduce the full indicator sequence, because the detailed rule order was not verified in full on a CRA page at the time of writing; the CRA's digital-economy guidance on place of supply is the source to read before configuring a checkout.
Step 6: Charge, remit, and keep the number
A simplified registrant charges and collects GST/HST on taxable digital supplies to Canadian consumers, reports and remits under the simplified framework, and generally cannot claim input tax credits for GST/HST on business inputs. A normal registrant charges and collects under the normal rules, reports on a GST/HST return, and generally claims input tax credits for tax paid on purchases related to commercial activities. A recipient registered under the normal regime who pays tax to a simplified registrant generally cannot claim an input tax credit for that tax, with exceptions, including seeking a refund or credit from the supplier after showing that normal registration was in effect when the supply was made. Business customers should therefore give their registration numbers at the time of supply, and digital sellers should keep the numbers they were given with the transaction record.
For qualifying goods, the normal regime applies end to end: the non-resident vendor or platform operator registers under the normal rules, charges tax on the goods under the normal place-of-supply rules, and claims input tax credits for tax paid on importation and other business inputs. Duties and taxes on the importation itself continue to apply, and the import steps in the guide on importing used goods, and the general import guide, cover the border side of a goods sale. For platform-based short-term accommodation, the simplified regime applies to the accommodation platform operator, and a host who is not registered under the normal regime can find the platform collecting the tax on the booking, while a host registered under the normal regime charges it directly.
Related guides:
GST/HST on an online or digital sale, in six steps
- Name what is being soldA digital product or service, a physical good delivered in Canada, and short-term accommodation are three different measures. The category decides the regime.
- Name the seller and the platformA non-resident vendor, a Canadian vendor, and a distribution or accommodation platform operator each have different registration duties, and a platform can be deemed to make the supply.
- Name the customerSupplies to Canadian consumers trigger collection under the digital measures. A recipient registered under the normal regime who provides a GST/HST number is not charged under the simplified regime.
- Pick the regimeCross-border digital products and services and platform-based short-term accommodation use simplified registration. Qualifying goods use normal registration. A business cannot hold both at once.
- Find the customer's provinceSpecial place-of-supply rules for digital products and services use residence indicators to place the customer in a province. The rate follows that province.
- Charge, remit, and keep the numberSimplified registrants charge and remit but generally cannot claim input tax credits. Normal registrants charge, remit, and claim input tax credits under the normal rules.
Questions people ask
How is GST/HST on digital sales different from GST/HST on goods sold online?
The regime is different. Cross-border digital products and services sold by non-resident vendors to Canadian consumers use a simplified GST/HST registration, reporting, and remittance regime. Physical goods, described by the CRA as qualifying goods, including goods delivered or made available in Canada and goods in a fulfillment warehouse, use the normal GST/HST registration regime, and the simplified regime is not available for them. This guide covers digital products and services, platform-facilitated supplies, and the contrast with goods; the guide on selling to other provinces covers the provincial tax, registration, and checkout mechanics for goods sold across Canada, and the guide on charging GST/HST covers the place-of-supply rules for goods in full.
When must a non-resident digital seller register under the simplified regime?
When the seller makes, or is expected to make, more than $30,000 in taxable supplies of digital products or services to consumers in Canada over a 12-month period. Supplies facilitated by a distribution platform operator that is registered for GST/HST and is deemed to have made the supply are excluded from that threshold. A non-resident distribution platform operator must register under the simplified regime where it makes, or is expected to make, more than $30,000 in taxable supplies of digital products or services to consumers in Canada over 12 months, including supplies by non-resident vendors that it facilitates. The measures took effect on July 1, 2021. Registration under the simplified regime is made only through the [non-resident registration web form](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/digital-economy-gsthst/register-gst-hst.html).
What is a distribution platform operator, and when is it deemed to make the supply?
A distribution platform operator is a person, other than the supplier of the goods, that controls or sets the essential elements of the transaction between the third-party vendor and the purchaser, or, if no such person exists, a person involved, directly or through arrangements with third parties, in collecting, receiving, or charging payment for the sale and transmitting payment to the vendor. A person who only operates a website that allows vendors to list goods for sale, such as a classified or advertising website, or who is solely a payment processor, is not a distribution platform operator. Where a registered platform operator facilitates a supply by a non-resident vendor, the operator is deemed to have made the supply and must charge and collect the GST/HST, including where the vendor is not registered under either regime. Even a seller who is not required to register can therefore find its customers charged GST/HST by the platform.
Do simplified registrants claim input tax credits?
Generally, no. There is no entitlement to claim input tax credits for GST/HST on business inputs under the simplified regime, unless the vendor or platform decides to register under the normal GST/HST registration rules. A business required to register under the simplified regime may, if it meets certain conditions, voluntarily apply to register under the normal regime instead, but it cannot be registered under both types at the same time. A recipient registered under the normal regime who pays GST/HST to a simplified registrant generally cannot claim an input tax credit for that tax, with exceptions, including where the recipient seeks a refund or credit from the supplier under the adjustment rules after showing its normal registration was in effect when the supply was made.
How is the customer's province decided for a digital sale?
By the special place-of-supply rules for digital products and services, which apply where the supplier or platform operator is registered under the simplified regime. The rules use residence indicators to determine the customer's usual place of residence, and where the residence has not been determined under the first two rules, the supplier may use a method the Minister has allowed to determine whether the residence is in a participating province. The normal place-of-supply rules apply instead where the supplier is registered under the normal regime. The rate charged follows the province where the customer is placed: the federal GST rate in a non-participating province, and the HST rate in a participating province. This guide does not reproduce the full indicator rules, because the detailed rule sequence was not verified in full on a CRA page at the time of writing; the CRA's digital-economy place-of-supply guidance is the source for the rule order.
Does a Canadian seller of digital products need to do anything different from a Canadian seller of goods?
The registration question is the same, and the place-of-supply analysis is similar but not identical. A Canadian seller registers under the normal regime, tests the $30,000 small-supplier threshold on taxable supplies, charges GST/HST based on where the customer is for services and where the goods are delivered for goods, and claims input tax credits on business inputs. A Canadian seller is not eligible for the simplified regime, which exists for non-resident vendors and platform operators. Supplies of digital products and services to recipients outside Canada are generally treated as exports and can be zero-rated where the conditions are met, which means no GST/HST is charged but input tax credits remain available; the export conditions for services should be checked against the CRA's zero-rating guidance before a sale is treated as zero-rated.
Sources
- Canada Revenue Agency, GST/HST for digital-economy businesses — Overview — three measures, simplified versus normal regime, platform operator collection where the seller is not registered —
- Canada Revenue Agency, GST/HST for digital-economy businesses, cross-border digital products and services — special versus normal place-of-supply rules by registration type, platform deemed-supply scenarios —
- Canada Revenue Agency, FAQ — Application of the GST/HST in relation to electronic commerce supplies — $30,000 simplified threshold, platform operator threshold including facilitated supplies, distribution platform operator definition and exclusions, no input tax credits under the simplified regime —
- Canada Revenue Agency, Doing Business in Canada — GST/HST Information for Non-Residents (RC4027) — digital-economy business types, simplified versus normal regime availability, cannot hold both, non-resident registration exceptions —
- Canada Revenue Agency, Recovery of the GST/HST Under the Digital Economy Measures — July 1, 2021 effective date, no collection where a normally registered recipient provides a registration number, input tax credit bar and refund route —
Where a point could not be verified in full on a Canada Revenue Agency page at the time of writing — the complete residence-indicator rule sequence for the special place-of-supply rules, and the full conditions for voluntarily moving from simplified to normal registration — this guide states the regime and the rule in general terms and points to the CRA's digital-economy place-of-supply guidance and registration guidance instead. No rate table is stated in this guide, because the rate follows the customer's province under the place-of-supply rules and the provincial rates are set out in the charging guide; check that guide for the current rate for each province.