Canada sales tax compliance now supported by Taxamo

Wed Mar 23, 2016

If you are a Canadian merchant selling digital goods and services in Canada you can now use Taxamo for Canada sales tax compliance.

Canada sales tax compliance

Here at Taxamo we have had feedback from our Canadian digital service merchants that they found it difficult to comply with domestic tax reporting requirements while also complying with new global digital tax requirements.

Taxamo has launched support of Canadian sales tax compliance for our merchants who have a Canadian domestic reporting requirement. We have done this so these merchants can now easily support both domestic and international digital tax reporting requirements.

Canada sales tax compliance support a natural step

Taxamo CEO John McCarthy expressed his delighted with this expansion of Taxamo’s service: “This is a natural next step for Taxamo, following as it does from our recently revealed support for U.S. sales and use tax for those of our merchants who have a US reporting requirement. It is Taxamo’s mission to support digital merchants wherever they do business. It is because of this commitment that we have now added Canada to our rapidly evolving portfolio of supported tax jurisdictions.”

Since January 2015, when we launched our flagship support for the 2015 EU VAT rules, the Taxamo solution has grown rapidly. In the intervening months we have added support for South African VAT, Japanese consumption tax, Norwegian VAT, and U.S. sales and use tax. In addition our support for South Korea, Switzerland, and Iceland is due to launch in the coming months.

Our support for Canadian digital tax will also be of particular interest to eCommerce platforms which may have an EU reporting requirement under the 2015 EU VAT digital tax rules, but who may not have not themselves have a tax reporting requirement in Canada.

Very often their Canadian customers have a reporting requirement in Canada and platforms need to provide sufficient data and consumer engagement to enable their Canadian customers to comply with Canadian tax rules. This can be difficult considering the particular requirements of Canadian taxes.

If you have a establishment in Canada supplying digital goods and services to Canada-based consumers then you can now use the Taxamo sales tax compliance solution.

How does Taxamo’s solution work?

So, what do you get with our solution?

Taxamo has developed a fully compliant digital tax solution that satisfies requirements in all regions. Once integrated with Taxamo, a digital service merchant meets all requirements of international digital tax regulations on tax calculation, reporting and invoicing.

Taxamo’s technical foundation is structured around an API used to detect a customer’s country of residence through a number of country evidence types including:

  • Credit card BIN

  • Billing country code

  • IP address geolocation

  • Additional ‘commercially relevant’ information,

  • Mobile phone number / SMS Verification

  • VAT identification number

The Taxamo solution now also provides the following features:

  • Tax reporting for filing of Canadian GST/HST, PST, QST returns

  • Evidence collection for tax audits

  • Threshold Monitoring

  • Compliant Canadian invoicing

In Canada GST/HST registrants, or businesses required to have a GST/HST registration number, must charge and account for the GST on taxable supplies (other than zero-rated supplies) of goods and services made in Canada.

Where GST/HST registrants make taxable supplies in a participating province, they must charge and account for the GST/HST. GST/HST is applied on B2B and B2C sales.

Canada sales tax compliance support with a global context

The broader international context to Taxamo supporting Canada sales tax is that moves are afoot to change how GST/VAT systems operate. The change is specifically related to the taxation of the digital economy. This challenge was action 1 in the Organisation for Economic Co-Operation and Development’s (OECD) recent Base Erosion and Profit-Shifting (BEPS) report.

The BEPS report states that the principle of taxing the digital economy is to “ensure that profits are taxed where economic activities generating the profits are performed and where value is created.”

Canada sales tax compliance

Consumption taxes are evolving across the globe as tax jurisdictions look more favourably on indirect taxation to raise much-needed revenue.

This global context is extremely important when it comes to compliance with Canadian sales tax. A sales threshold of CAD$30,000 exists, however it takes into account a merchant’s global sales. Therefore if a domestic merchant’s worldwide sales are over CAD$30,000 then sales tax (GST/HST) will apply to this merchant’s sales in Canada.

GST stands for goods and services tax, while HST represents harmonized sales tax. Combined, these tax rates form the Canadian sales tax system. However, there are also additional regional sales taxes such as QST (Quebec Sales Tax) and PST (provincial sales tax).

Taxamo provides an end-to-end compliance solution that enables merchants to comply with a new wave of regulatory obligations. Our solution allows for real-time tax calculation, evidence collection, tax return data and audit reports, with minimal impact on the customer journey.

How do I enable Canada in Taxamo?

Assuming your product/services qualify as digital goods/services sold in Canada and you are above the threshold to pay Canadian sales tax, then complete the following steps:

  1. Log into the Taxamo portal and go to: My account > Tax regions .

  2. Enable in Test mode or Live mode for the relevant dates.

  3. Enter your Canadian business number (BN).

If you are using an integration other than the Taxamo API or the Taxamo checkout form, please confirm that your integration type has been upgraded to support Canada.

Canada and digital taxation

Canada – like many other tax jurisdictions worldwide – has also dipped its toe in the water of digital taxation.

Plans to introduce a ‘Netflix tax’ had been proposed in Canada in an effort to protect native streaming content. Here’s a good piece on the situation.

Indeed, a Canadian government first explored the potential of such a tax, based on the consumer’s location, in their 2014 Budget. The topic also became a hot issue in the 2015 Canadian government elections. Former Canadian Prime Minister Stephen Harper even released a video during outlining his opposition to such a tax.

I love movies and TV shows. I’m 100% against a #Netflix tax. Always have been, always will be #NoNetflixTax #elxn42https://t.co/oUYgTkXH3q — Stephen Harper (@stephenharper) August 5, 2015

Netflix was on target for some 4m Canadian subscribers by end of 2015 and the proposed tax on streaming and digital services is estimated to raise CA$55m . The idea behind the streaming video tax is to support domestic Canadian content creators.

Note: Taxamo content is created for guidance only, please consult your local tax advisor.

Contact us to find out more about our solution