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Dropship taxes Canada & USA

by eck340
7 replies
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Hi everyone,

I am starting an e-commerce website that I will be selling products with some dropshippers.

I am located in Canada and I would like to know some informations.
Should I register my company where I live in Canada or in the USA ?

My main inquiry is for taxes, since I am located in Canada and my dropshipper in the US who pay the tax and who I need to charged tax to ?

Should I charged taxes to customer who are in the same state of the dropshippers or charged tax only to Canadians where my business is located ? Or incorporate a business in the US ?

I want to sell and ship worldwide, I sell from Canada but orders are fulfilled and ship in the US.

So what should I do, Incorporate my business in Canada or in the United-States?
Charge Taxes to customers who are in the states my business is located and/or charge taxe to customer who are in the sames states as my dropshippers ?

Thank You guys.
#canada #dropship #taxes #usa
  • Profile picture of the author OnlineStoreHelp
    Originally Posted by eck340 View Post

    Hi everyone,

    I am starting an e-commerce website that I will be selling products with some dropshippers.

    I am located in Canada and I would like to know some informations.
    Should I register my company where I live in Canada or in the USA ?

    My main inquiry is for taxes, since I am located in Canada and my dropshipper in the US who pay the tax and who I need to charged tax to ?

    Should I charged taxes to customer who are in the same state of the dropshippers or charged tax only to Canadians where my business is located ? Or incorporate a business in the US ?

    I want to sell and ship worldwide, I sell from Canada but orders are fulfilled and ship in the US.

    So what should I do, Incorporate my business in Canada or in the United-States?
    Charge Taxes to customers who are in the states my business is located and/or charge taxe to customer who are in the sames states as my dropshippers ?

    Thank You guys.
    This is a question for tax professionals, not a forum like this. Spend 300 bucks and get a local CPA (I can't remember the designation in Canada) that specializes in small business give you a consultation so you can understand what you need to do. Heck they might not even charge you. My understanding is Canada tends to be less forgiving on taxes so if you plan to make a business out of it, get a consultation.
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  • Profile picture of the author eck340
    Can I work with US Dropshipper if my company is located in Canada ?
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  • Profile picture of the author xanadux666
    Ask the dropshipper(s). the rest is accounting. Canada and USA have biggest daily trade on earth. Accountants know how to deal with this.
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  • Profile picture of the author timpears
    it is really up to the drop shipper. A lot depends on where your customers are. Most of the business on the web seems to come from USA, so if you are dealing with a USA drop shipper, then it should be no problem. What ever profits you make will be up to you to report and pay your required taxes on.
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    Tim Pears

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    • Profile picture of the author eck340
      Originally Posted by timpears View Post

      it is really up to the drop shipper. A lot depends on where your customers are. Most of the business on the web seems to come from USA, so if you are dealing with a USA drop shipper, then it should be no problem. What ever profits you make will be up to you to report and pay your required taxes on.

      Im talking about sales taxes here ...
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  • Profile picture of the author tritrain
    I've got some scary news for you, that you'll want to consider very, very carefully before you take the plunge.

    Currently there are 9600+ tax jurisdictions in the US alone. In the past, the taxes were up to the consumer to pay. That rarely happened. Now the states are all about trying to increase the collection of taxes, so they are putting the responsibility on the seller. So, even with the free software that is supposed to be provided to all internet sellers, it would be a HUGE pain. That is why there are various bills being suggested. Make sure you read the Marketplace Fairness Act and also any competing bills.

    This will be a game changer for many internet businesses.
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  • Profile picture of the author timpears
    If you are in Canada, then you are not subject to collecting local sales taxes as I understand it. Understand, I am not a lawyer, and this is a legal question. But my understanding is that you have to have a structure in the tax collection jurisdiction to be subject to collecting the taxes.

    In my location, we have a sales tax of over 8% when you add the State and the county taxes. I can go ten or so miles south and cross the river and I am in a no tax jurisdiction. So anythinf i buy there is not taxed. When I bring it back across the river, I am supposed to pay the taxes on it myself. And you can bet everyone does, RIGHT.

    I personally wouldn't worry about it. You need to talk to your shipper and a lawyer, so you don't get in big trouble. An hour or less of his time will be plenty, and well worth the cost, in my opinion. But, I don't think you will need to collect any of the taxes.
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    Tim Pears

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