When you sell goods on Amazon, you enter a whole new world of selling called e-commerce. There are plenty of opportunities to build a solid business on Amazon, but just because it is online doesn’t mean your sales are exempt from Canadian tax law. To help Amazon sellers remain compliant with Canada Revenue Agency (CRA), AF Accounting offers a complete suite of accounting and bookkeeping expertise called A2X that is tailored for Amazon sellers. We also have a five-part series on our blog called the Amazon Seller’s Guide to Canadian Taxes.
Now, let’s look at another important aspect of the tax system affecting Canadian Amazon sellers: tariff classifications.
What are Tariffs and Why Do They Need Classifications?
Tariffs are trade barriers to protect the seller and buyer and help foster ideal conditions in the global free market. Simply put, it is a tax on imported consumer goods.
Tariffs help protect developing nations from exploitation and help the nation importing to avoid health issues (for example, a tariff on foods thought to be contaminated). However, tariffs have not always been used in such lofty ways. There are times when a political situation sees tariffs imposed on countries as a way of bullying or punishing.
Since there are many different kinds of foods, products, and items that can be imported, tariffs are broken down into categories and subcategories. For example, chemicals have their own category, but are further broken down into inorganic and organic.
Different categories, or classifications, have different tariff rulings. Therefore, as an Amazon seller, you must be aware of which classification your goods fall under so you can remain compliant with CRA.
Advance Rulings for Tariff Classifications
The Canada Border Services Agency (CBSA) publishes advanced rulings for tariff classifications so importers can obtain the 10-digit tariff classification number as necessitated by the Canadian Customs Tariff.
The classification of tariffs is, for some items, rather complicated but the onus remains on the importer to get it right. This is where advance rulings come in. With an advance ruling, the importer is assured that the tariff classification in use for their products is correct according to the CBSA.
The advanced ruling can be obtained by making a request in writing or by email. Anyone that imports goods into Canada, is authorized to account for goods under the Customs Act, or exports goods outside of Canada, can make the request.
AF Accounting is a progressive accounting and bookkeeping company that helps small businesses in Canada thrive. We know that business is not just about brick-and-mortar stores anymore, but also encompasses e-commerce and other platforms. Having systems in place, such as cloud accounting, Xero, or A2X, while also having experts on hand that know and understand Canadian tax law, means your business can grow while keeping up with the required reporting and remitting to CRA. Remember, CRA does not consider being misinformed about your compliance as a valid excuse for missing payments or neglecting to file the proper documents.