US Sellers With Canadian Inventory: Tax and GST/HST

What changes when you store goods in Canada instead of shipping each order from the US?

Canadian stock puts the goods in Canada before the customer orders. That changes the GST/HST sales analysis, adds a separate customs step if you import the stock, and makes the location of inventory relevant to Canadian income tax. Goods sent by mail or courier to a Canadian buyer from a US address are outside the special definition of goods already in Canada used by the CRA's qualifying-goods rules.

Keep the three decisions separate: who imports the goods, who must charge GST/HST on a sale, and who may have to file an income tax return. A warehouse contract does not answer all three. The CRA considers inventory location, delivery, contracts, and local people when deciding whether a non-resident carries on business in Canada for GST/HST; its income tax test is separate.

Does Canadian warehouse stock mean I need a business number and GST/HST account?

Canadian stock alone does not require your business to get a Canadian business number (BN) or GST/HST account. Your business needs a BN if it registers for GST/HST or imports commercial goods under its own import-export (RM) account (CRA: registration; CBSA: import accounts). A non-resident carrying on business in Canada and making taxable Canadian supplies generally needs normal GST/HST registration once it is no longer a small supplier; the CRA treats Canadian inventory as one factor, and its warehouse example finds Canadian business activity where inventory, delivery, and solicitation are all in Canada.

Even if the seller does not carry on business in Canada, direct sales of taxable goods already in Canada to specified Canadian recipients can require registration when applicable revenue exceeds C$30,000 over a 12-month period. The CRA's qualifying-goods threshold has its own sales calculation, including a rule for sales made through a registered marketplace. A GST/HST account uses a Canadian business number (BN); an import-export account under that BN is a different program account. For the business-presence and qualifying-goods registration tests and when charging begins, see non-resident and digital sellers.

If either test requires registration, apply within 30 days after the registration duty begins (Excise Tax Act, section 240(2.1)).

If a marketplace collects GST/HST, what must I check on my own sales?

Check whether your business is registered under the normal GST/HST regime and whether each order was made through the marketplace. A normally registered vendor must collect GST/HST even on qualifying goods sold through a platform. A registered platform collects on qualifying goods it facilitates for a vendor that is not normally registered; a direct sale by that vendor needs its own registration review (CRA: who collects).

The platform rule does not erase customs tax paid when stock entered Canada. It also does not decide provincial sales-tax accounts. See non-resident and digital sellers for the separate provincial review.

If I import my stock, do I need a separate import-export account?

Yes, if your business imports commercial goods, it needs an import-export (RM) account under its Canadian BN. A non-resident importer gets the BN from the CRA, then registers the RM account with the CBSA before importation (CBSA: import-export accounts). An existing GST/HST account does not replace the RM account.

If a Canadian supplier imports goods it owns and later sells them to you, confirm whether it, rather than your business, is the importer. The contract, title terms, and customs entry should agree.

Who pays GST when the stock enters Canada?

The person liable for customs duty pays the GST or federal part of HST on taxable imports. The owner at release and importer of record can be jointly liable with the importer (Excise Tax Act, section 212; Customs Act, section 17(3)). The CRA says import tax is charged on the Canadian-dollar value including duty and excise tax. For commercial goods destined for an HST province, the provincial part is not paid at the border but may require self-assessment.

Name the importer before shipping. Compare the purchase terms, customs declaration, BN/RM account, broker authority, and proof of payment. Paying a warehouse's invoice does not by itself show that your business was the importer of record.

Can I recover import GST, and whose records support the credit?

A GST/HST registrant that caused the goods to be imported and paid import tax may claim an input tax credit (ITC) when the goods meet the commercial-activity requirements. Registration and a customs payment alone do not prove entitlement (CRA: imports and ITCs). Keep customs accounting documents, proof of tax payment, purchase and shipping records, and agreements showing who caused the import; the CRA requires adequate support before the ITC return is filed (CRA: documentary evidence).

If another party is the importer of record, identify who caused the import. A registered de facto importer may still claim the ITC if the named importer paid on its behalf; keep evidence of that payment and a copy of the import documents (CRA: import ITC policy). A special platform rule may let a registered platform claim an ITC for import tax paid by a non-registered vendor, with satisfactory evidence; do not assume both can claim it. For filing GST/HST returns and other ITCs, see filing GST/HST and input tax credits.

An unregistered seller cannot claim an ITC just because it paid import GST. If it was a small supplier immediately before registering and still holds inventory for commercial supply, section 171 may allow a credit for the inventory's basic tax content. If an unregistered non-resident instead delivers goods in Canada to a GST/HST registrant before using them there, section 180 can let that buyer claim a credit with satisfactory proof of the seller's import tax payment.

When can a drop-shipment certificate stop a Canadian supplier from charging me GST/HST?

If an unregistered US seller buys goods or manufacturing work from a Canadian GST/HST registrant and has it deliver the goods in Canada, the drop-shipment rule can require GST/HST on the goods' fair market value, even when the invoice is for work on the goods. A certificate can relieve the registered supplier's covered sale or service to an unregistered non-resident that is not a consumer when it transfers physical possession to a registered consignee that gives it a valid certificate. The consignee accepts possible tax obligations, and the supplier's covered supply is deemed made outside Canada.

For the usual registered-consignee route, the consignee gives the supplier the certificate. A registered owner can sometimes give one instead. For a qualifying sale that a registered distribution platform is deemed to make and must tax, the unregistered non-resident seller gives the supplier a different certificate naming the platform and its GST/HST number (Excise Tax Act, section 179). A direct-sale consumer cannot issue the registered-consignee certificate. A warehouse has separate possession rules, and its storage fee can remain taxable even when the supplier's goods are relieved (CRA: warehouse example). Check the warehouse's role and any import ITC. If your business is GST/HST registered, do not assume these unregistered-seller exceptions apply.

Can Canada ask a non-resident GST/HST registrant for security?

Yes. A non-resident applying for GST/HST registration generally must provide security if it has no Canadian GST/HST permanent establishment or makes supplies only through another person's fixed place of business in Canada. Security is not required if estimated annual taxable Canadian supplies are at most C$100,000 and annual net tax is within C$3,000 payable or refundable. The CRA's non-resident guidance gives a first-year amount based on 50% of estimated net tax, whether payable or refundable, with a general C$5,000 minimum and C$1,000,000 maximum.

An income-tax treaty permanent establishment is not the GST/HST permanent-establishment test (CRA: security memorandum).

The seller also bears collection risk. A sole proprietor owes their own GST/HST. General partners, including former ones, can owe partnership GST/HST arising during membership; members at dissolution can also owe later amounts (Excise Tax Act, section 272.1(5)). Corporate directors can owe unremitted net tax, interest, and penalties under section 323, subject to collection conditions and a due-diligence defence; the CRA must assess within two years after they last ceased to be directors. A person receiving the seller's property for less than fair value without dealing at arm's length can owe its GST/HST or income-tax debt, within statutory limits, and can be assessed at any time (Excise Tax Act, section 325; Income Tax Act, section 160).

Does storing and selling stock in Canada mean I carry on business there for income tax?

It may, but inventory alone is not a complete income-tax test. The CRA weighs where goods are delivered, where inventory sits, where orders are solicited, and what Canadian staff or agents do; shipping each US order to Canada, with delivery as the only Canadian factor, is different from selling from Canadian stock (CRA: income-tax audit guidance).

If the US seller produces, improves, or packs goods in Canada, or solicits orders or offers goods for sale there through its agent or servant, the Income Tax Act's extended business rule can deem that seller to carry on business in Canada. A Canadian supplier's own work does not settle the seller's status. Document who owns stock, where contracts are made, who accepts orders, what the warehouse does, and whether a Canadian person can bind your business. A GST/HST registration result does not decide the income-tax result (CRA: separate tests).

Does a Canadian warehouse create a permanent establishment under the Canada–US treaty?

A warehouse used solely to store, display, or deliver the US resident's goods is excluded from the treaty's permanent-establishment definition; stock held solely for processing by another person is also excluded. The same treaty separately treats a fixed place used to run the business, and a person who habitually concludes contracts for it, as potential permanent establishments (Canada–US treaty, Article V).

For a qualifying US treaty resident without a Canadian permanent establishment, Article VII generally leaves business profits taxable only in the US. The storage exception does not decide whether other Canadian activities create a permanent establishment. If domestic law treats an owner as resident in both countries, Article IV's tie-breakers control treaty residence; some dual-resident companies need competent-authority agreement. Treaty eligibility also needs individual review for a US LLC whose income is taxed to its owners rather than the LLC itself (treaty, Articles IV and VII).

Must my US corporation file a Canadian T2 if a treaty removes Canadian tax?

Yes, if the corporation carries on business in Canada. The CRA requires a non-resident corporation to file a T2 even when it claims that a treaty exempts the profit. It files Schedule 91 for the treaty claim and Schedule 97 for its non-resident information (CRA: non-resident corporations).

File the T2 within six months after the corporation's tax year ends (CRA: T2 filing deadline). If it owes Canadian income tax, a US corporation's balance is due 2 months after year-end (CRA: balance-due day).

The sequence matters: decide whether the corporation carries on business in Canada, then whether the treaty shields its profits. A treaty exemption can remove tax without removing the T2 duty. If the corporation does not carry on business in Canada, inventory alone is not a reason to assert a T2 filing duty; other triggers, such as disposing of taxable Canadian property, need their own check.

If I sell as a sole proprietor or partnership, whose Canadian return is at issue?

For a sole proprietor, the possible Canadian income-tax return is the individual's return. For a partnership, each partner reports its share on its own return; the partnership generally does not pay income tax or file an income-tax return (CRA: non-residents; CRA: partnership income). A partner that is a corporation has its own T2 analysis; a partnership information return is a separate question.

For a non-resident individual whose Canadian business profit is fully treaty protected, the Income Tax Act's individual filing exception may mean no Canadian return is required if no other filing trigger applies. Do not extend the corporation's T2 rule to the individual. Confirm treaty residence, Canadian activities, and any other Canadian income or property before deciding.

If a self-employed individual must file, the usual T1 deadline is June 15 after the tax year; any balance is due April 30 (CRA: individual due dates).

Example

Illustrative amounts are in Canadian dollars. A US corporation owns goods in a Canadian warehouse. It imports that stock under its own BN and RM account at a C$80,000 customs value, with no duty or excise tax. Its import GST is C$4,000. In one 12-month period, it sells C$60,000 directly to Canadian consumers and C$40,000 through a registered marketplace. Its warehouse only stores and ships the goods; a US office accepts orders.

The direct sales exceed the qualifying-goods threshold, so the corporation must register if that rule applies and it is not already normally registered. The platform sales are excluded from that threshold if the platform is treated as making them. If the corporation registers normally, it accounts for GST/HST on its taxable marketplace sales as well as direct sales. It checks its import and tax-payment records before claiming the C$4,000 ITC. On these facts, the warehouse's storage and shipping fall within the treaty's storage exception, so the warehouse alone does not establish a permanent establishment. The corporation must still test whether it carries on business in Canada; if it does, it files a T2 and claims any treaty exemption on Schedule 91. A Canadian agent who can conclude contracts could change the treaty result.

Different for you?

• You need the precise GST/HST registration date or have direct sales through several channels: see non-resident and digital sellers.
• You store or deliver goods in Quebec: register under Revenu Québec's general QST system if covered sales to buyers not registered under that system exceed C$30,000 over 12 months; the province excludes some non-resident buyers (Revenu Québec). For British Columbia, Saskatchewan, or Manitoba sales, check separate provincial rules in non-resident and digital sellers.
• You need to claim other GST/HST credits or file a return: see filing GST/HST and input tax credits.
• You are choosing a branch or subsidiary: see a US business expanding into Canada.
• Your warehouse handles customs entries, a Canadian person accepts orders, your seller is a US LLC, or you have missed filings: gather entity and ownership records, supplier and warehouse contracts, customs entries, BN and account numbers, sales by channel and province, and Canadian staff or agent agreements. Get cross-border tax help to review the importer, treaty claim, and return duty together.