Dropshipping in Canada means selling goods you never hold: a supplier ships each order direct to the customer. Set up the business and tax accounts, settle who imports the goods and who handles returns, and write the returns policy before the first sale.
Applies in: across Canada
Dropshipping is a way of selling, not a way around the rules of selling. You list products you do not hold, a customer orders from your store, you pass the order to a supplier, and the supplier ships the goods direct to the customer. Your business is the storefront, the customer service desk, and the party the customer paid. That is the whole model, and it is also the whole risk: the customer never deals with the supplier, so every late shipment, wrong item, and damaged parcel is your problem to fix, even when the supplier caused it.
This guide covers the setup, supplier, tax, and returns mechanics for a Canadian dropshipping business. It makes no earnings claim of any kind: no income figure, no margin promise, and no suggestion that any product or supplier will sell. Whether a product sells is a demand question to test with a small number of orders, not a claim to take from a supplier's sales page.
Start with the accounts that every Canadian seller needs, in the order the government expects them. A business number is a unique 9-digit number the CRA gives your business to identify it when dealing with the CRA and other government programs. You need one if you own or operate a business in Canada and have to deal with the CRA for certain taxes or programs, including collecting GST/HST, having employees, importing or exporting goods, incorporating, filing information returns, or filing corporate income tax. Register through Business Registration Online, which the CRA says generally issues the business number and program accounts instantly. Starting November 3, 2025, registrations for a new business number or CRA program accounts must be done online through Business Registration Online.
A GST/HST program account, RT, is added to the business number when you register for GST/HST. You have to register if you are not a small supplier and you make taxable supplies in Canada. A small supplier has revenue from worldwide taxable supplies of $30,000 or less in a single calendar quarter and over the last four consecutive calendar quarters, excluding consideration for the sale of goodwill, supplies of financial services, and supplies by way of sale of capital property. Below that test, voluntary registration is available and lets you claim input tax credits, at the cost of charging tax and filing returns from the start. If your business uses a name other than your own, register the business name with the province as well; the provincial registration and the federal business number are different registrations, and one does not replace the other. Quebec is administered separately, with Revenu Quebec generally administering GST/HST there.
A dropshipping supplier is a business partner who holds the stock, packs the order, and ships it under your store's name. Choose on the things you can check before the first customer order: order a sample for yourself and time the delivery, inspect the packing, and confirm the product matches the listing description, photographs, and specifications. Check how the supplier handles a wrong item, a damaged parcel, and a customer who changes their mind, and get the answers in writing. A supplier who answers slowly before you are a customer will answer more slowly after you are one.
The written agreement, even a short one by email, should settle five points. First, who is the importer of record for goods entering Canada, and who pays customs duties, GST, and any other charges. Second, who holds the stock and what happens when an item is out of stock after a customer has paid. Third, the shipping method, the tracking that is provided, and the delivery time the supplier will commit to in writing. Fourth, who handles returns, who pays return shipping, and what happens to goods that come back. Fifth, what product information the supplier guarantees: the description, the country of origin, the tariff classification support, and any certification or labelling the product category requires. If a supplier will not put those five points in writing, keep looking. The cheapest supplier price in a catalogue is not the cheapest cost once a return, a re-shipment, and a refund are added to it.
A dropshipped product has three costs, not one: the supplier price, the cost of getting the goods to the customer, and the tax and duty cost of the border crossing. For goods imported into Canada, start by finding the tariff classification number, the standardized code used to identify goods for customs purposes. The first six digits are common across countries using the Harmonized System, and the next four digits are unique to Canada. The classification number, together with the country of origin, determines the tariff treatment and the duty rate. Reduced rates apply where goods qualify under one of Canada's trade agreements, and a preferential tariff claim needs proof of origin on hand.
Once the classification and tariff treatment are known, work out the value for duty, which in most cases starts with the price paid to the seller and may need adjustments. GST is calculated on the total value of the goods and applicable duties. The CBSA gives a worked example: goods valued at US$100, converted at US$1 to CAN$1.37, give a value for duty of CAN$137.00; at a 4% duty rate the duty is $5.48, the value for tax is $142.48, GST at 5% is $7.12, and the total duty and GST payable is $12.60. That example is the CBSA's illustration with its own figures, not a rate for your goods. Use the Duties and Taxes Calculator in the CARM Client Portal to estimate the amounts for your actual product, classification, and origin before you set the price, and keep the estimate with the listing. If the supplier ships direct to a Canadian customer from outside Canada, decide and disclose who pays any charge at delivery. A price that looks competitive until the customer is asked for duty and GST at the door is not competitive; it is a refund waiting to happen.
Where the supplier is in Canada and the goods are already in Canada, the import calculation does not arise, but the GST/HST treatment of the sale still does. The supplier's invoice to you and your invoice to the customer are separate supplies, and each is taxed on its own terms. Keep both invoices, and do not assume the GST/HST the supplier charged you is automatically recoverable: input tax credits follow the registrant and commercial-activity rules, and the claim belongs on your GST/HST return, not as a discount on the customer's invoice.
The store listing is where the supplier relationship becomes visible to the customer, and it should state what is true: the product, the price including or excluding tax as the checkout requires, the shipping time, and who to contact when something goes wrong. Do not state a delivery time the supplier has not committed to, and do not copy a supplier's product description without checking it against the sample you ordered. A description that overstates what the product does becomes your refund and your complaint, even though the words came from the supplier.
Take payment through a processor that handles Canadian sales and refunds, and keep the payout records with the order records. The order record for each sale should show the customer, the product, the price and tax charged, the supplier order, the tracking number, and the delivery confirmation. That record is the file you will need for the tax return, for a GST/HST return, and for any dispute about whether the goods arrived. A store with no order file beyond the platform dashboard is a store that cannot answer a chargeback, a tax question, or a customer complaint from its own records.
Returns are where dropshipping breaks down most often, because the goods are with the customer, the stock is with the supplier, and the money is with you. Write the policy before the first sale, and write it for the province where the customer is, because consumer protection law in Canada is provincial. The policy should state, in plain language: how long the customer has to ask for a return, what condition the goods must be in, who pays return shipping, whether the refund is to the original payment method, and how long the refund takes once the goods are received back. Then agree the same terms with the supplier, so a return the supplier accepts and a return you promised are the same return.
Ontario's Consumer Protection Act, 2002 is the worked example in this guide because its internet agreement rules are stated in the statute itself. A consumer may cancel an internet agreement at any time from the date it is entered into until seven days after the consumer receives a copy of the agreement, if the supplier did not disclose the information required under the Act or did not provide an express opportunity to accept or decline the agreement or correct errors immediately before entering into it. A consumer may cancel within 30 days after the date the agreement is entered into if the supplier does not comply with the copy-of-agreement requirement. Those are cancellation rights under the statute, and they sit alongside whatever return policy the store offers; the store policy does not replace them. Other provinces have their own consumer protection statutes with their own rules for distance and internet sales, so check the statute of each province you sell into rather than assuming Ontario's rules travel. If a product arrives damaged, wrong, or not as described, handle it as a problem to fix first and a policy question second: a replacement or refund given quickly costs less than a complaint escalated to a provincial consumer protection office.
Dropshipping income is business income, reported on the personal return of a sole proprietor through Form T2125, Statement of Business or Professional Activities, or on the corporation's return if the business is incorporated. The expenses to track are the supplier costs, platform and payment fees, shipping costs you paid, advertising, and the business part of any home office or phone cost. Keep the supplier invoice for every order, the customer invoice, the shipping record, and the payment record together, so each sale can be traced from customer payment to supplier order to delivery.
Keep your records for six years from the end of the last tax year they relate to, unless the CRA gives you permission to destroy them earlier. That six-year rule covers the records behind the income tax return and the GST/HST return. File the GST/HST return on the reporting period assigned to the account, and keep the GST/HST treatment of each sale visible in the records: which sales were taxed, which were zero-rated exports, and what input tax credits were claimed. A dropshipping business with clean monthly records is a business that can answer a CRA question in an afternoon. One with a year's orders in a platform dashboard and no invoices is a business that reconstructs the year under pressure.
The first is pricing from the supplier price alone and meeting duty and GST at the customer's door. The second is listing a product never ordered as a sample, so the first quality complaint comes from a paying customer. The third is promising a delivery time the supplier never committed to. The fourth is writing a returns policy copied from another country, with no check of the province where the customer lives. The fifth is treating the supplier as the seller in the customer's eyes: the customer paid you, and the complaint, the refund, and the review all belong to you. The sixth is keeping no records beyond the platform: when the platform changes, the account closes, or the CRA asks a question, the records that matter are the ones you kept yourself.
This guide states no supplier margin, no shipping time, no platform fee, and no consumer protection rule for any province other than Ontario, because no official page states those figures. Delivery times and fees depend on the supplier and the carrier chosen for the order, and provincial consumer protection rules must be checked in the statute of the province of sale. The guide also states no GST/HST filing-frequency threshold and no penalty figure, for the same reason. The CBSA duty and GST figures in Step 3 are the CBSA's own worked example, included as an illustration of how the calculation works, and are not a rate or amount for any particular product.
You need a business number when you have to deal with the CRA for the taxes or programs that apply to the business, including collecting GST/HST, importing or exporting goods, or filing corporate income tax. The CRA gives the business a unique 9-digit number, and each program account adds letters to it, such as RT for GST/HST. Register through Business Registration Online, which the CRA says generally issues the business number and program accounts instantly. A provincial business name registration is separate from the federal business number and is handled by the province.
It depends on the small supplier test and on where the supply is made. You have to register for a GST/HST account if you are not a small supplier and you make taxable supplies in Canada. A small supplier has worldwide taxable supplies of $30,000 or less in a single calendar quarter and over the last four consecutive calendar quarters. Below that test you may still register voluntarily, which lets you claim input tax credits but means charging tax and filing returns. For sales to customers outside Canada, the zero-rating rules for exports may apply instead, so check the supply type before you set the checkout tax.
Someone has to, and the answer must be agreed before the first order, not discovered at the border. When goods are imported into Canada for commercial use, they may be subject to customs duties, excise duties or excise tax, GST, surtax, or safeguard measures, depending on the goods, their origin, and their tariff classification. GST is calculated on the total value of the goods and applicable duties. If the supplier ships direct to the Canadian customer, the customer may face the charge at delivery unless the arrangement says otherwise. Use the CBSA Duties and Taxes Calculator in the CARM Client Portal to estimate the amounts before you price the product, and state in the listing who pays any charge at the border.
Only if the product meets the rules for its category, and the supplier must prove it, not just promise it. The CBSA import guides start with admissibility: confirm the goods are allowed into Canada before working out duties and taxes. Food, cosmetics, electronics, children's products, and health products each carry their own federal requirements, and a product lawful in the supplier's country may not be lawful to sell in Canada. Get the tariff classification number, the country of origin, and any certification or labelling information in writing from the supplier, and do not list a regulated product on a supplier's assurance alone.
Write the policy before the first sale, and base it on the law of the province where the customer is, not on a template copied from another country. In Ontario, the Consumer Protection Act, 2002 gives a consumer cancellation rights for internet agreements in defined cases, including cancellation until seven days after the consumer receives a copy of the agreement where the supplier did not disclose required information or did not provide an express opportunity to accept or decline the agreement or correct errors, and cancellation within 30 days where the supplier does not comply with the copy-of-agreement requirement. Your own policy sits on top of those rights, not instead of them. State who pays return shipping, what condition the goods must be in, and how long a refund takes, and agree the same terms with the supplier so a customer return does not become a loss you absorb alone.
In dropshipping, you never hold the goods: the customer orders from you, you order from the supplier, and the supplier ships direct to the customer. In a stock model, you buy the goods, import them yourself, hold them, and ship each order. Dropshipping avoids the cost of holding stock, but it also means you do not see the goods before the customer does, you depend on the supplier's shipping speed and packing quality, and a supplier delay or error arrives as your customer complaint. The tax and import duties do not disappear in either model; they land on whoever the arrangement makes responsible for them.