Sales Tax in Canada

Canada’s sales tax system differs from the United States, as it includes federal and provincial components. There are three main types of sales taxes in Canada:

1. Goods and Services Tax (GST): A federal tax of 5% on most goods and services.
2. Provincial Sales Tax (PST): A tax levied by some provinces, varying from 6% to 10%.
3. Harmonized Sales Tax (HST): A combination of GST and PST, applied in certain provinces.

Sales Tax Rates

• GST: 5% nationwide.
• PST: Varies by province (e.g., British Columbia at 7%, Saskatchewan at 6%).
• HST: Varies by province (e.g., Ontario at 13%, Nova Scotia at 15%).

Businesses, Artisan Furniture in this case, must charge the appropriate sales tax based on the province of sale and remit it to the respective tax authorities.

Reseller Certificate

In Canada, a reseller certificate (or tax-exempt certificate) allows businesses to purchase goods without paying sales tax, provided these goods are intended for resale. To obtain a reseller certificate:

1. Register with the Tax Authority: Businesses must register with the Canada Revenue Agency (CRA) or the relevant provincial tax authority.
2. Use the Certificate: When purchasing goods for resale, provide the supplier with the reseller certificate to avoid paying sales tax at the time of purchase.

Compliance and Validation

The responsibility for validating the reseller certificate lies with the supplier. Ensure the certificate is valid and keep records of all transactions involving tax-exempt sales.

Nexus in Canada

Nexus in Canada refers to a business’s obligation to collect and remit sales tax in a province where it has a significant presence. This presence can be:

• Physical: Having an office, employees, or a warehouse in the province.
• Economic: Meeting certain sales thresholds within the province.

If a business has nexus in a province, it must register for, collect, and remit the appropriate sales taxes for that province.

Economic Threshold

The economic threshold in Canada varies by province. For example, businesses must register to collect GST/HST if their taxable sales exceed CAD 30,000 in a calendar year. Provinces with PST have their own thresholds and registration requirements.

Key Points

1. GST Registration: Required if taxable sales exceed CAD 30,000.
2. PST/HST Registration: Varies by province; check specific provincial requirements.
3. Sales Tax Compliance: Businesses must comply with both federal and provincial sales tax regulations.

Important Considerations

• Record Keeping: Maintain detailed records of all sales and tax-exempt transactions.
• Regular Updates: Stay informed about changes in sales tax laws and rates in different provinces.
• Professional Advice: Consult with a qualified accountant for specific queries and compliance assistance.

For further details, refer to the Canada Revenue Agency’s GST/HST guide and the respective provincial tax authority websites.