The rules for the liabilities on e-commerce sales for non-resident sellers via ‘distribution platforms’ change from 1 July 2021. If the foreign seller only sales its Canadian-located stocks to consumer via a distribution platform, then the platform takes on the federal Goods and Services (GST) and Harmonised Sales Tax (HST) registration and collections role.
This is similar to the July 2021 EU marketplace deemed supplier reforms, and marketplace liabilities obligations in Australia, Norway and many other countries. The Canadian tax authorities are looking to shift the tax obligations onto marketplaces or similar persons controlling the local sale and interactions with the consumer.
Conditions for Canadian Distribution Platform liabilities
A registered distribution platform is a party that controls the distribution and sale of a third-party foreign seller’s goods. This includes listing the goods, payment processing and delivery. This covers marketplaces who control the consumer relationship and fulfilment of the goods and consideration processing.
The non-resident seller must first make an import of goods into Canada for storage in a third-party warehouse. It only make sales via distribution platform(s).
The sellers makes a zero-rated sale to the distribution platform – outside the scope of Canadian GST or HST. The distribution platform operator then makes a taxable supple to the Canadian consumer.
The platform will be able to recover the import GST paid by the sellers.