1/23/2025

Sales Tax Obligations for Canadians Running a Shopify Business

Navigating the world of sales tax can feel like trying to find a needle in a haystack, especially for Canadians running a business on platforms like Shopify. Understanding your obligations isn't just a burden, it’s VITAL for staying compliant with the Canada Revenue Agency (CRA) regulations. This blog post breaks down everything you need to know about sales tax when operating your Shopify business in Canada.

What is Sales Tax?

Sales tax is a tax you charge your customers when they purchase goods or services from your business. In Canada, there are generally three types of sales taxes:

Goods and Services Tax (GST) – a federal tax that applies across Canada.
Harmonized Sales Tax (HST) – a blend of the GST and provincial sales tax (PST) that some provinces use.
Provincial Sales Taxes (PST) – applied in provinces that do not use HST.

Understanding these different types is crucial because your Shopify store will need to comply with the current sales tax regulations in your operating province.

The Importance of Registering for a GST/HST Number

If your business earns over $30,000 in gross revenue over four consecutive quarters, you are required to register for a GST/HST number. This number allows you to collect GST or HST from your customers and remit it to the CRA. If you don’t register and earn above this threshold, you could face penalties and interest charges.

Even if your revenue is below the threshold, you CAN register voluntarily which allows you to claim back any GST/HST paid on your business expenses. This can significantly reduce your operating costs.

You can register for your GST/HST number easily online through the CRA’s Business Registration Online service.

How to Set Up Sales Tax in Shopify

Setting up sales tax correctly in Shopify is essential for ensuring that you meet your obligations without any hiccups. Here are the steps to ensure you’ve got everything in order:

Navigate to Settings
In your Shopify admin, head to Settings and then select Taxes.
Select Your Region
You will see options for Canada and possibly other regions. Click on Canada and ensure that the provinces you are selling to are correctly selected here.
Configure Tax Rates
Shopify will automatically calculate the GST/HST rates based on your location. Ensure the rates are accurate by checking against the CRA’s website. You will also need to adjust if you are selling products with different sales tax rates (for example, food vs non-food).
Enable or Disable Tax Calculations
If you’re just starting out and don’t want to charge taxes yet, you can simply disable this feature. However, it’s always best practice to consult with a tax professional.
Ensure Accurate Product Classification
Know your products. Some items may be exempt from GST/HST altogether. For instance, certain basic groceries. Understanding your product classifications can save you a lot of trouble.
Conduct Regular Reviews
Tax rates and regulations change. Make it a habit to check in frequently on your Shopify tax settings to ensure they are up to date.

Identifying Your Tax Liabilities

Understanding where your tax liabilities lie is important. You may need to charge sales tax depending on:

The location of your sale: Canadians are subject to their local tax rates, which vary from province to province.
The type of goods/services sold: Some products, such as books, may have different rates or be exempt.
Your business nexus: If you have a permanent establishment in a province, you will need to register and collect taxes in that province.

More Than Just Selling Online

If you’re also selling through other channels, such as marketplaces like Amazon or eBay, these sales also count toward your tax threshold. So, if you’ve crossed the $30,000 threshold, you must register for a GST/HST number even if you only trade goods in Canada.

Tax Filing Requirements

Once you’re registered for a GST/HST number, you will be required to file tax returns. The frequency of filing can depend on your total annual sales:

Annual – If your revenue is under $1.5 million.
Quarterly – If your revenue exceeds $1.5 million.
Monthly – For businesses that have significant sales.

Make sure you keep accurate records of all sales, including those from your Shopify platform, as you will need this data when you file your taxes.

You must also ensure that you are remitting any taxes collected. The CRA takes tax remittance seriously, so stay diligent to avoid penalties or interest on late payments.

Utilizing Shopify’s Sales Tax Insights

Shopify’s Sales Tax Insights feature can really simplify the process. This tool can help you understand your obligations in Canada and the US by breaking down where you might need to charge or collect tax. The insights cover various jurisdictions, ensuring you always stay compliant.

You can find these insights by going to the Settings → Taxes tab in your Shopify Admin. Here you can also see the locations where you may currently have a tax liability, monitor potential thresholds, and access links for relevant tax authorities.

Seeking Professional Help

When in doubt, it is always best to consult with a tax professional who is knowledgeable about Canadian tax laws. Not only can they help clarify your obligations, but they can also assist in filing your taxes effectively and efficiently.

Don’t take the risk of handling taxes without the right support. Getting it wrong can lead to penalties or even an audit, and that's definitely NOT something you want as a business owner.

Enhance Your Customer Engagement with Arsturn

Navigating taxes can be a hassle, but when you’re all set up correctly, it allows you to FOCUS on what really matters—growing your business! Speaking of growth, why not supercharge your customer engagement by incorporating a custom chatbot on your Shopify store? With Arsturn, you can easily create a Conversational AI chatbot tailored to your brand. It enhances customer interaction, answers frequently asked questions, and helps guide users through your store.

Arsturn is user-friendly, requiring no coding skills. This means you can focus less on techy details and more on SALES without the worry of customer queries slipping through the cracks.

Join thousands of others using Arsturn to set their SALES game to the next level today! You'll not only save time but increase your customer satisfaction, leading to higher retention rates.

Conclusion

Understanding sales tax obligations is an essential part of successfully running your Shopify business in Canada. Be diligent in tracking your sales, ensure accurate setup on Shopify, and don't hesitate to seek professional advice if you need clarity on complex regulations. Once you've got your sales tax sorted out, you can truly focus on ENGAGING your customers and expanding your business!

Remember: Taxes may be a pain, but Arsturn makes customer engagement a breeze. Get started with Arsturn today and see the DIFFERENCE it can make for your business!