I have a question regarding US state taxes.
With the emergence of online shopping, Canadian businesses are increasingly selling to other countries including the USA.
I have done some basic research regarding Canadian businesses selling to US states. I have come across the South Dakota v. Wayfair court case and the term economic nexus.
From my understanding, each state has a sales/transaction threshold: e.g. $100,000 or 200 transactions.
Does this mean that as long as a Canadian business stays under the threshold there is no economic nexus and no need to collect and remit tax to that particular state?
I have done some further research and read if a Canadian business uses a marketplace (e.g. Amazon, Etsy and Ebay) these marketplaces may register, collect, and remit taxes on the business’ behalf. (May need to research this a little further). However, if you use a platform (e.g. Shopify) they may not.
Thoughts/Feedback would be appreciated
This is far more complex than you might think.
In some states, the tax rate for a sales and use tax will be different for different customers a mile away from each other, as the sales and use taxes are made up of multiple components.
The Canadian Seller might find that the cost of bookkeeping is higher than their gross profit for an item, depending on the product sold and distribution pattern.
It was a while back but I seem to recall a presenter at one of Alan Salmons road shows for US sales tax compliance software. Can’t remember the name though maybe someone else remembers.
Just went to his site and saw that he has passed, it was always fun attending the seminars and always got something from them. (MAPS!!!).
virtual memorial service on Saturday January 16, 2021 at 2.00pm ET .
If you are going to do business in the US, you better check out Avalara - the US sales tax software. If you think GST/HST is confusing, in the US they have thousands of sales tax rates - federal, state, municipal - one on top of the other.