Are you handling Amazon sales tax properly as a Canadian seller? If not, you could risk penalties, back taxes, or account issues, which is why this Amazon sales tax guide for Canadian sellers matters.
Selling on Amazon is one of the most reliable ways to grow a product-based business on a platform that already attracts massive buyer demand, with Amazon.ca getting at least 6 million visits per day. But since Amazon puts customers first, it also enforces strict rules that sellers must follow to stay compliant.
One of the most misunderstood rules involves sales tax and how it applies to Amazon sellers in Canada. Knowing what taxes to charge, collect, and remit helps prevent costly mistakes that can slow down growth.
In this guide, our Amazon agency breaks down how sales tax works for Canadian sellers, covering GST, HST, PST, QST, and Amazon fees. We also share strategies to stay compliant and protect your business and profits.
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Understanding Amazon Canada Sales Taxes
Canadian sales taxes are required by the federal and provincial governments on most goods and services. As an Amazon seller, these taxes apply to your sales and some of the fees Amazon charges for services like FBA and advertising.
Amazon may calculate and collect certain taxes under marketplace facilitator rules, depending on the province and tax type. When those taxes are included in your payout, registered sellers remain responsible for remitting them to the appropriate tax authority.
Because remittance is still the seller’s responsibility in most cases, sellers must track, report, and pay the correct taxes themselves. Understanding which taxes apply and including them in your pricing and accounting is critical to maintaining compliance and protecting your margins.
Types of Taxes Amazon Canada Sellers Must Deal With
Canadian Amazon sellers are responsible for several types of taxes depending on their location, sales, and services used. Each tax has its own rules, and understanding them is key to staying compliant and avoiding penalties.
A. GST (Goods and Services Tax)
GST is a federal tax of 5% applied to most goods and services in Canada. If you are registered for GST, Amazon includes the GST collected in your payout, and you are responsible for remitting it to the CRA.
B. HST (Harmonized Sales Tax)
HST combines federal GST with a provincial portion and ranges from 13% to 15% depending on the province. When you are registered, Amazon collects HST based on the buyer’s shipping address and passes it to you in your payout for remittance.
C. PST (Provincial Sales Tax)
PST applies in British Columbia, Saskatchewan, and Manitoba and is separate from GST and HST. In these provinces, Amazon acts as the marketplace facilitator and automatically collects and remits PST or RST on your behalf, so you generally do not remit these taxes for Amazon sales.
D. QST (Quebec Sales Tax)
QST is Quebec’s provincial tax of 9.975% and applies in addition to GST on sales shipped to Quebec. If you are required to be registered for QST, Amazon collects the tax, includes it in your payout, and you are responsible for remitting it to Revenu Québec.
E. Sales Tax on Amazon Fees
Amazon charges sales tax on certain seller fees, including referral fees, FBA fulfillment, and advertising services. Registered sellers can claim these taxes back as Input Tax Credits, while unregistered sellers must treat them as non-recoverable business expenses.
Why Canadian Amazon Sellers Must Take Sales Tax Seriously
Some Amazon Canada sellers might try to bypass paying taxes, thinking it will save them money or that calculating them is too complicated. This can result in unexpected bills, penalties, or account suspension.
1. The Out-of-Pocket Trap
If the CRA determines you should have collected GST/HST or provincial taxes but didn’t, you must pay the uncollected amounts yourself. This can quickly wipe out profits or even force a seller to close their business.
2. CRA Penalties and Interest
Late or incorrect tax filings trigger penalties and daily interest that accumulate quickly. Even small mistakes can escalate into significant financial liabilities over time.
3. Missing Out on Tax Refunds (Input Tax Credits)
If you’re not registered for GST/HST or provincial taxes, you cannot claim Input Tax Credits on Amazon fees or business expenses. This means overpaying taxes unnecessarily.
4. Amazon Account Suspension
Providing incorrect tax information or failing to meet tax obligations can cause Amazon to hold funds or restrict selling privileges. Since registered sellers are responsible for remitting the GST or HST included in their payouts, noncompliance can trigger enforcement from both the CRA and Amazon.
5. Increased Audit Risk
The CRA monitors online sellers closely and matches Amazon’s reported sales data with your filings. Any discrepancies can trigger audits.
6. Damage to Reputation and Cash Flow
Unexpected tax bills, penalties, or account holds can disrupt cash flow and day-to-day operations. This can also harm your reputation with Amazon and your customers.
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Seller Tips for Handling Amazon Sales Tax in Canada
Handling sales tax correctly can protect your profits and prevent serious legal trouble. Following these best practices saves time, reduces errors, and ensures long-term success.
1. Register for GST/HST and Provincial Taxes
Register with the CRA for a Business Number and GST/HST if your sales exceed CAD $30,000 over four consecutive quarters. Also register for PST, RST, or QST where required.
Correct registration ensures you can claim Input Tax Credits on business expenses. Without proper registration, you risk paying taxes out of pocket and facing penalties.
2. Set Up Tax Calculation Services in Seller Central
Enable Amazon’s Tax Calculation Services (TCS) to automatically calculate the correct taxes on each order. Assign Product Tax Codes (PTCs) to your listings so items like groceries or children’s clothing are taxed correctly and customers aren’t overcharged.
This automation reduces human error and ensures compliance with destination-based tax rules. It also makes it easier to generate accurate sales tax reports for filing and reconciliation purposes.
3. Monitor Your Sales Threshold and Filing Frequency
Keep track of your total sales to know when you surpass the CAD $30,000 threshold that triggers mandatory GST/HST registration. Depending on your sales volume, CRA may require you to file monthly, quarterly, or annually.
Knowing your filing schedule helps you avoid late filings and penalties. It also ensures you consistently claim Input Tax Credits, maximizing refunds on Amazon fees and business expenses.
4. Regularly Reconcile Tax Reports
Amazon provides detailed tax reports, including the “Combined Sales Tax Report”, showing which taxes were collected and who is responsible for remitting them. Regularly reconcile these reports with your records to ensure accuracy and avoid surprises at tax time.
Reconciliation helps prevent cash flow mistakes, like accidentally spending money owed to the CRA. It also simplifies your filings and lessens the risk of audits.
5. Manage Import Taxes and Duties
When shipping inventory into Canada, you are responsible as the Importer of Record to pay applicable GST and duties at the border. These taxes can be reclaimed as Input Tax Credits on your GST/HST return, so it’s important to track them separately.
Treating import taxes as a refundable credit rather than a cost of goods ensures you don’t overpay and improves margin accuracy. Many sellers lose money by misclassifying these charges, which can add up significantly over time.
6. Seek Professional Advice for Complex Situations
For cross-border sales, multi-warehouse logistics, or unique product tax rules, consulting a professional, such as an Amazon agency, can help prevent costly mistakes. An agency can help you interpret complex provincial rules, correctly file taxes, and optimize your Input Tax Credit claims.
Professional guidance is especially valuable if you sell on both Amazon.ca and Amazon.com, as U.S. withholding and reporting rules must also apply. Investing in expert advice can save thousands in penalties and missed credits over the long term.
Frequently Asked Questions
Master Amazon Canada Sales Tax to Protect Your Business
Setting up your Amazon Canada sales tax correctly is critical, and following this Amazon sales tax guide for Canadian sellers helps you avoid unexpected penalties and account suspensions. Many sellers still fail to register properly, assign the right Product Tax Codes, or track taxes accurately, leading to costly back taxes and compliance problems.
Understanding GST, HST, PST, and QST is the basic requirement for any seller. This Amazon sales tax guide for Canadian sellers ensures you maintain compliance, protect your profits, and scale your business without surprises.
Are you unsure if your tax setup is correct or fully compliant? Contact our full-service Amazon agency and let our experts handle your sales tax management so you can focus on growing your business.
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