In this series we have been exploring the requirements of the Canadian tax system for Amazon sellers. Part 1 detailed how Canada Revenue Agency (CRA) classifies eCommerce retailers. Part 2 looked at why the structure of your eCommerce setup matters, and Part 3 discussed how to offset the disadvantage of Canadian versus foreign digital eCommerce.
Today we will look at import taxes.
Are you an importer?
Are you buying goods directly from manufacturers from outside of Canada to sell in your Amazon store? If so, you are an importer. Are you a Canadian buying drop shipping items that are fulfilled by Amazon outside of Canada? If so, you are an importer. Are the goods you are selling made, sourced from, and shipped completely within Canada’s borders? If so, you are not an importer.
Why does it matter?
Imports carry important fees such as duties and taxes. The importer is responsible for paying these fees when the product enters the country. If duties are applicable, this fee is paid in addition to the import tax.
Duties are not always applicable. They depend on the type of product you are importing, and where you are importing it from. Duties are designed to protect each country’s economy by controlling how many goods enter/leave the country and by catching the transfer of illegal goods.
Protect yourself – due diligence is key
Failing to pay import taxes and duties can get you in very hot water with CRA but importing illegal goods (even unintentionally) and not properly documenting your activities will get you into even more trouble. Before you start calculating your import fees and duties, first familiarize yourself with what is and what is not allowed into the country. Once you have determined that you can import your goods, learn if they have any specific permits, restrictions or regulations. Then, and only then, can you calculate your taxes and duties.
Amazon’s import fees’ deposit process
Amazon has a process to help the Canadians deal with items that are sold by a third party and fulfilled by Amazon outside of Canada. While this is useful for personal buyers, it is also helpful for eCommerce sellers that are purchasing items from Amazon for re-sale or will be using FBA sites. Basically, this is what you need to know any time you are dealing with imports from Amazon as a buyer or a seller.
- Amazon identifies these products on the detail page.
- Amazon estimates the import fees and adds that amount to your total.
- You authorize the international carriers partnering with Amazon to pay this amount to Canadian authorities.
- If Amazon overestimated the fees, you get a refund. If they underestimated, Amazon will cover the difference.
It’s not a static process
Import fees and duties are always the responsibility of the importer – and the fees can change due to economic and political conditions around the world. If you are importing goods for your eCommerce site, you must stay on top of the regulations and fees.
Call in the experts
Running a business – even an eCommerce business – isn’t easy. Don’t go it alone. AF Accounting has a full suite of services to help Amazon sellers and other eCommerce retailers with their accounting and CRA reporting. Visit us online today to get the help you need to succeed.
Leaving the 9-5 to run your own thriving eCommerce site? Here’s how to calculate your own payroll deductions.