Operating an Amazon Business in Canada offers entrepreneurs an incredible opportunity to tap into the e-commerce boom. However, with great opportunities come great responsibilities, including fulfilling your tax obligations accurately and timely. Navigating tax return filing can be daunting, but this guide aims to simplify the process and ensure compliance for Tax Return Filing for Amazon Business in Canada.
Tax Return Filing for Amazon Business in Canada
GST/HST Registration: If your Amazon Business exceeds $30,000 in annual gross sales, you are required to register for the Goods and Services Tax (GST) or Harmonized Sales Tax (HST), depending on your province. Registration can be done online through the Canada Revenue Agency (CRA) website.
Recent Merchant Tax Policy has tasked the Amazon Marketplace to collect and remit on behalf of customers which reduces your compliance tasks but those who had already registered are required to carry on collecting and remitting to CRA.
Keep Accurate Records: Maintain meticulous records of all your business transactions, including sales, expenses, refunds, and any other financial activities related to your Amazon Business.
Taxable Supplies and Input Tax Credits (ITCs)
Taxable Supplies: Most products sold through Amazon are considered taxable supplies. You’ll need to charge the appropriate GST/HST to your customers based on their location.
Input Tax Credits (ITCs): You can claim ITCs on the GST/HST you’ve paid on eligible business expenses. This includes Amazon’s referral fees, shipping fees, and other related expenses.
Fulfillment Method and Tax Implications
Fulfilled by Amazon (FBA): If you’re using FBA, Amazon handles storage, packaging, and shipping. However, you’re still responsible for collecting and remitting the correct taxes based on the destination of your products.
Fulfilled by Merchant (FBM): With FBM, you manage the entire order fulfillment process. Ensure you charge the appropriate taxes based on the customer’s location.
Tax Return Filing Process
Gather Documentation: Collect all your business-related documents, including sales records, expense receipts, and tax-related communications from Amazon.
Calculate Taxable Income: Calculate your total sales and eligible expenses, ensuring accurate calculations of GST/HST collected and ITCs claimed.
Complete GST/HST Return: File your GST/HST return using the CRA’s online portal or through a certified accounting software. Declare your total sales, GST/HST collected, and ITCs claimed.
Remit Payment: Pay any GST/HST owed to the CRA by the deadline indicated on your return. Late payments can result in penalties and interest.
File Income Tax Return: Include your business income on your personal income tax return. Ensure accurate reporting to avoid any discrepancies.
Common Mistakes to Avoid
Incorrect Tax Rates: Charging the wrong GST/HST rate based on your customer’s location can lead to compliance issues.
Missing Records: Incomplete or inaccurate record-keeping can lead to challenges during audits.
Late Filing: Failing to file and remit taxes on time can result in penalties and interest.
Contact Expert Amazon Tax Accountant Abdullah CPA for Tax Filling of Amazon Business in Canada.
