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Ask HN: Does a Canadian online retailer have to pay US taxes on US sales?
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.
- patio11 9y agoAs 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.
- cmdlinerambo 9y agoIf 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.
- patio11 9y agoYou need to talk to an accountant and say the words "tax treaty" and "permanent establishment" then listen very carefully to what they say.
- rgbrenner 9y agono, 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.