How to charge taxes for online services?


3

We are a Canadian-based incorporated business that is about to sell subscriptions to a SaaS, both yearly and monthly.

How do we handle adding taxes to the service? Since we are a Quebec-based business, do we charge our customer the Quebec tax rate? If our client is based in any particular province/state, do we charge the taxes of that province/state?

Of note, we are not actually shipping any products, only delivering a service online, so I don't know if the location of the client matters or not.

Web Tax Saas

asked Feb 12 '11 at 02:34
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Jb Lesage
70 points
Top digital marketing agency for SEO, content marketing, and PR: Demand Roll

2 Answers


4

You really need to ask an accountant.

I'm based out of Ontario, so we have HST, which is a combination of GST and PST. As I recall, Quebec does not have the harmonized tax, so the rules will be a little different than Ontario.

Usually in Canada, as far as I've been able to determine, you charge tax based on where the service or good is being provided, that is, based on the location of the purchaser. So if I were to sell a service to someone in Manitoba, I would charge GST (since I'm not registered to collect their Provincial tax). In Ontario, I charge HST, and out of the country, I don't collect anything (I think, I don't do many cross-border sales).

Unless you want to register with each province, the only tax you would therefore need to collect is GST, unless you sell to someone within Quebec, in which case the local rate applies. However, every time I've asked Revenue Canada for a ruling, I get a different answer, since even they don't understand how this is supposed to work.

answered Feb 12 '11 at 07:02
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Elie
4,692 points
  • I work for a business that sells stuff online from Montreal. No taxes to International clients. GST to all Canadian clients and QST for Quebec residents (on top of the GST). – Faust 8 years ago
  • Sounds about right - according to one version I got from Revenue Canada. Every time I call them, I get another answer about what to charge... – Elie 8 years ago

0

See my answer here for a similar question:

Taxes for Android / iPhone developers? Basically, for location based taxes such as sales tax, you need to have a physical presence to actually be subject to sales tax. If you don't have a physical presence, then you should be ok at the time of the writing of this post, though the tax law changes every day.

Note: This is not legal advice and does not give rise to an attorney client relationship.

answered Feb 22 '11 at 09:54
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Alex Naegele Lawyer
653 points

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