Alas! in e-commerce taxland - taxes
In demanding to comply with tax laws for your e-business, you may find by hand lessening down the rabbit-hole, going all through the looking glass, and presence a Mad Tea-Party.
Common sense, logic, and fairness never did apply fully to the field of taxation but this is exceptionally true of e-commerce transactions.
1. Canada Customs Welcomes You to Canada!
Since I`m located in Canada, let`s start here.
Canada has what you might call a inhabitant sales tax or a value added tax (VAT). This Goods and Army Tax (G. S. T. ) of seven percent is applicable to many Canadian transactions.
Not only is it decisive to agree on whether a taxable sale was made in Canada or not, but also where in Canada. If it was made (or deemed to be made) in any of the Coordinated Sales Tax (H. S. T. ) provinces (Nova Scotia, New Brunswick, and Newfoundland and Labrador), a higher, fifteen percent H. S. T. rate applies. This is for the reason that those provinces have allowable Canada to collect their local sales taxes for them.
As well, each county and territory has its own rules. Ontario charges eight percent retail sales tax on many classic Internet transactions where Alberta has no regional sales tax.
Of course, this is only scatching the surface. This entire critique is an over-simplification of a very complex subject. You will beyond doubt need professional counsel to help you all through E-Commerce Taxland.
2. When Exports Aren`t Exports
In Canada, exports are "zero-rated" sales for G. S. T. purposes. This means that when you ship a artifact to someone exterior Canada, you don`t allege G. S. T. Yet, you get to claim (or abstract from the G. S. T. collected by you) all the "input tax credits" (G. S. T. that you paid for affair purposes) to make that export. The idea, I suppose, is to further exporting.
However, if you export crop other than tangible, physical goods, beware! There are many pitfalls to watch out for.
As one example, be concerned about digitized food that you might sell from your Canadian website, such as e-books, downloadable software, or subscriptions to content. You would be careful to be advertising "intangible own property". But for your consequence is also painstaking "intellectual property" (such as software or e-books that you created or have obtained the civil rights for), you will have to allege G. S. T. The reason why, according to the Canada Customs and Revenue Agency, is that it COULD be used exclusive Canada, even if it isn`t.
Say you sold a link for accessing digitized content (from a choice of sources) on your Canadian website to a buyer in the United States. Since there are no restrictions as to where the indescribable personal belongings may be used, and the chattels is not painstaking intellectual assets (nor the provision of a service), the American buyer is subject to G. S. T. , even if he never comes to Canada.
Strangely, the same logic doesn`t apply when an American buys a conventional book (or a car) which he COULD bring into Canada with him and use here. It is true that it is easier for Canada to assess such items at the border than in cyberspace, but I know of no cases of Americans being taxed on the books or cars they bring with them when they come to live in Canada for about half the year.
As a Canadian registrant, one way you might officially avoid this silly March Hare is to explicitly state on your website and bill of lading that use of such ethereal personal acreage in Canada is prohibited (or requires an bonus fee and the payment of G. S. T. ).
3. When Imports Aren`t Imports
Goods shipped to Canada are area of interest to G. S. T. on importation. Such tax is often assessed at the border. But what if you are a Canadian registered for G. S. T. , selling to a Canadian consumer but your supplier is in a distant country?
Pretend that your Canadian consumer has bought a book from you from your Canadian website. Your drop ship supplier is located in the United States and is registered for G. S. T. You fax your order to the American company, and they, in turn, ship the book for you (complete with Customs Declaration and their G. S. T. Business Number).
Since they paid the G. S. T. , you wouldn`t think you would have to accusation it again, would you? "Wrong!", smiles the Cheshire cat. Since you are a registrant located in Canada, you are compulsory to allegation and remit the G. S. T.
But you are at liberty to input tax credits, aren`t you? In many cases, the key is "No".
It may be very challenging for you to be suitable for the documentary and other mechanical requirements. As an example, it is not uncommon for American suppliers to absolutely garbage to give an account breach down the G. S. T. or to allow you to be the Importer of Record. This complicates their life unreasonably and they just don`t need the aggravation.
There are relieving tax provisions layer drop shipping, sales agencies, and other situations. In many cases, unfortunately, the most applied answer is to allow the tax to be paid twice.
4. When You`re Area of interest to Tax Where You`re Not Subject to Tax
It makes sense that countries be in the way a tax on sales and income made in their own jurisdiction. But does it make sense for Germany to tax sales made in the United States?
In effect, early July 1, 2003, the European Union has done just that by arresting an online sales tax.
This means that if a big name from England buys an e-book from a big shot in the United States, the American must submit this tax. Of course, If the sale was to a big cheese in Germany, the tax rate would be different.
The rationale after this follows: Since countries can`t accumulate sales tax on Internet transactions at their borders, the only way they can amass it (other than a self-assessment system) is with an online sales tax. Further, it is claimed that businesses in the European Union endure a major competitive difficulty because they have to accumulate Value Added Tax (VAT) but others don`t.
I know what they mean. Accept to the club!
J. Stephen Pope, Head of Pope Consulting Inc. , http://www. popeconsultinginc. com/ has been portion clients to earn greatest big business profits for over twenty years.
For costly Work at Home Small Commerce Ideas, visit http://www. yenommarketinginc. com/
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