Ask HN: Does a Canadian online retailer have to pay US taxes on US sales?

#1

Post by cmdlinerambo » Fri, Aug 25, 2017, 1:01 AM UTC

I just started working with a small Canadian online retailer that has always done the majority of their business in Canada.

US sales have been considered sales and included in income on the Canadian taxes and a US tax return has never been filed.

As we grow the business in the States, do we have US tax liability even if we don't have a physical presence? Do we have to collect US sales tax? Pay US income taxes? Does this change if we open a warehouse in the states? I would hate to invest my effort in this and find out that we owe a bunch of back taxes. Any information is greatly appreciated.

Re: Ask HN: Does a Canadian online retailer have to pay US taxes on US sales?

#2

Post by patio11 » Fri, Aug 25, 2017, 1:10 AM UTC

As we grow the business in the States, do we have US tax liability even if we don't have a physical presence?

Possible but unlikely; talk to an accountant. It will depend on a variety of facts which are difficult to assess from your post.

Do we have to collect US sales tax?

If you have a nexus (physical connection) in a US state, you may be required to collect and remit sales tax. Historically, it would be pretty easy to judge that you don't have a nexus. However, states are starting to become more expansive in their definition of what would create one. You may need to talk to an accountant.

Opening a warehouse in the US will almost certainly result in you having a nexus in the US state in which you open the warehouse, which will result in an obligation to collect and remit taxes for that state.

Re: Ask HN: Does a Canadian online retailer have to pay US taxes on US sales?

#3

Post by rgbrenner » Fri, Aug 25, 2017, 1:10 AM UTC

no, that's not how that works. If the US intends to tax your goods, they will assess a duty when they are imported into the US.

Edit: I should clarify: I am assuming that you operate entirely in Canada (and Canadian owned), and ship the goods into the US via postal service/ups/fedex/etc.

Re: Ask HN: Does a Canadian online retailer have to pay US taxes on US sales?

#4

Post by cmdlinerambo » Fri, Aug 25, 2017, 1:20 AM UTC

patio11 wrote: post #2

As we grow the business in the States, do we have US tax liability even if we don't have a physical presence? Possible but unlikely; talk to an accountant. It will depend on a variety of facts which are difficult to assess from your post. Do we have to collect US sales tax? If you have a nexus (physical connection) in a US state, you may be required to collect and remit sales tax. Historically, it would be pretty eas…

If there is a warehouse in the states do you have to pay income taxes of just collect sales taxes? I know I need to find a good accountant...thanks for the recommendation.

Re: Ask HN: Does a Canadian online retailer have to pay US taxes on US sales?

#5

Post by patio11 » Fri, Aug 25, 2017, 2:23 AM UTC

cmdlinerambo wrote: post #4

patio11 wrote: post #2

As we grow the business in the States, do we have US tax liability even if we don't have a physical presence? Possible but unlikely; talk to an accountant. It will depend on a variety of facts which are difficult to assess from your post. Do we have to collect US sales tax? If you have a nexus (physical connection) in a US state, you may be required to collect and remit sales tax. Historically, it would be pretty eas…

If there is a warehouse in the states do you have to pay income taxes of just collect sales taxes? I know I need to find a good accountant...thanks for the recommendation.

You need to talk to an accountant and say the words "tax treaty" and "permanent establishment" then listen very carefully to what they say.