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

1 points by cmdlinerambo ↗ HN
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.

4 comments

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patio11
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.

cmdlinerambo
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.
patio11
You need to talk to an accountant and say the words "tax treaty" and "permanent establishment" then listen very carefully to what they say.
rgbrenner
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.