The recent upset over changes to Australia’s rules on GST applied to low-value goods has for some of my clients once again raised the spectre of similar issues selling and shipping to consumers in Canada. Those using Fulfilled by Amazon or Amazon Advantage have had to open an account with Amazon Canada and ship product to their fulfillment warehouses there or use a Canadian broker. All of which is expensive.
You can, as many do, simply elect to use a different method of selling to Canadians, such as through eBay or your own website. But as with Australia, there are some caveats to selling to Canadians, and some tricks to make it easier on your customer.
Under Canada’s GST tax rules for foreign companies, any non-resident person or company with gross worldwide sales less than CDN $30,000 quarterly is deemed a “small supplier” and does not have to collect and remit the Canadian GST. (Quarterly is defined as a period of three months beginning on the first day of January, April, July, or October in each calendar year.) Further, even if you do sell $30,000 worth of goods in one quarter, you must sell $30,000 in four executive quarters before you lose your status as a small supplier and registration becomes mandatory. So even if you have one or two really good quarters in a year, you won’t have to register unless your sales become consistently high. For most self-published authors, that is unlikely to happen.
However, pay attention to the fact that Canada counts your sales worldwide, not just sales to Canadian addresses. And your total sales include ebooks and any other taxable income associated with your business, not just physical books you might ship to a Canadian consumer. This is a fundamental difference between Canada and Australia.
Another fundamental issue is how “doing business in Canada” is defined. Foreign entities can be defined as doing business in Canada if, for example, they use a Canadian agent or warehouse, or keep a Canadian bank account for Canadian sales, or maintain a Canadian website/subdomain. (There are further considerations, listed on the link provided above.)
Another interesting angle concerns how your Canadian customer pays and how you ship to them. If the Canadian customer pays for the product over your non-Canadian website (or via PayPal, for example, linked to from your website or a site such as eBay), and if they pay for the shipping and any optional insurance against loss or damage in transit, and if you do not offer free replacement of non-insured items lost or damaged in transit, then the shipment is deemed to have been sent Free on Board: Origin (“FOB: Origin”). If so, the supply (of the product) is deemed to have taken place in your country, not in Canada. If, on the other hand, you pay for the shipping and insurance, and you guarantee delivery, then the supply does not occur until the product reaches your customer’s address. Therefore the supply would take place in Canada, and you would be doing business in Canada. Nevertheless, you would still be safe from mandatory registration if you continue to meet the definition of a small supplier.
So what happens, then, to any books you (as a small supplier) might sell and ship to a Canadian consumer? Are these books tax free? No. Your customer still has to pay the GST, but they will do so directly when they import the item. And this is where how you send your book to Canada really makes a difference to your customer.
When you ship your book to Canada using your national postal service, you will fill out a customs declaration form that is attached to the package. On this form you will identify the contents (“book”) and its value in the currency of sale (for example, USD $20.00). (Don’t undervalue your goods since a quick check of your website will reveal the true value and then you will have caused problems for your customer.) You pay the postage and off it goes. That’s all you have to do.
(If you are sending the book for free as a giveaway, you still have to declare its full retail value, but you will specify that the book is a gift/promotional item.)
As per international postal agreements, when the book then reaches Canada, the Canadian Border Services Agency (CBSA) takes temporary possession of the package. There is no need for anyone to hire a customs broker. Your customer does not need to supply the CBSA with a waybill. Instead, the CBSA simply converts the value of the book into Canadian dollars and applies the 5% GST to it. The CBSA attaches the GST declaration to the postal tracking card; this GST is then collected from the consumer by the post office when the package is delivered (or the customer attends at the post office to pick up the package).
But if you use a courier to ship a book to Canada, you will really burn your customer. This is because anything sent by courier must be cleared by a customs broker.
You will be asked by the courier — UPS, for example — to supply your customer’s phone number; when the package arrives in Canada, the customer is called and asked if they would like the courier to act as the customer’s import broker. The customer says yes, and the courier company provides a cost for any duties and taxes plus the brokerage fees, and then GST on the brokerage fees (because the brokerage is a taxable service to the customer). The customer then pays by credit card over the phone, and the package is processed and delivered. If the customer wants to pay COD (cash on delivery), some brokers will charge an insurance fee to cover the duties and taxes if they exceed a certain value.
Those brokerage fees quickly add up. Worse still, the shipping fees themselves are almost always higher than when shipping by post, even if you select priority airmail. I have seen books increase in cost by as much as 50% when imported by courier. That would definitely not make your customers happy.