HST/GST on online sales, digital services, marketplace rules, and cross-border obligations
Running an e-commerce business in Canada involves a more complex tax landscape than a traditional brick-and-mortar store. You may be selling to customers across provinces (each with different HST/GST rates), internationally, or through third-party marketplaces like Amazon, Shopify, or Etsy. This guide covers the key tax obligations for Canadian e-commerce businesses in 2025.
The same $30,000 threshold applies to e-commerce businesses: once your total taxable revenue exceeds $30,000 in any 12-month period, you must register for HST/GST and charge the applicable rate based on the customer's province.
For physical goods, the applicable HST/GST rate is determined by where the goods are delivered — the customer's province, not yours. This is called the "destination-based" approach.
| Customer's Province | Tax Rate | Type |
|---|---|---|
| Ontario | 13% | HST |
| Nova Scotia | 15% | HST |
| New Brunswick | 15% | HST |
| Newfoundland & Labrador | 15% | HST |
| PEI | 15% | HST |
| British Columbia | 5% GST + 7% PST | Separate taxes |
| Alberta | 5% | GST only |
| Manitoba | 5% GST + 7% RST | Separate taxes |
| Saskatchewan | 5% GST + 6% PST | Separate taxes |
| Quebec | 5% GST + 9.975% QST | Separate taxes |
Since July 2021, non-resident businesses selling digital products or services to Canadian consumers must register for and collect GST/HST once they exceed $30,000 in annual Canadian sales. This applies to foreign Netflix, Spotify, Adobe, and similar platforms. As a Canadian e-commerce business selling digital products (software, ebooks, courses, subscriptions), the same destination-based rules apply as for physical goods.
Since July 2021, "qualifying distribution platforms" (Amazon Marketplace, Etsy, eBay, etc.) are required to collect and remit HST/GST on behalf of sellers using their platforms for sales to Canadian customers. This means:
Dropshipping — where you take orders but a third-party supplier ships directly to customers — has specific tax implications in Canada:
Sales of physical goods exported to customers outside Canada are generally zero-rated for GST/HST purposes — you charge 0% GST/HST. You still need to be registered and file returns, but no tax is collected on export sales. You can still claim Input Tax Credits on business expenses related to those zero-rated sales.
If you sell to US customers, you may have US sales tax obligations depending on your sales volume in each US state. The 2018 Supreme Court ruling (South Dakota v. Wayfair) established that states can require out-of-state sellers to collect sales tax based on economic nexus (sales volume), not physical presence. Most states have thresholds of $100,000 in annual sales or 200 transactions.
Managing US sales tax compliance typically requires dedicated software like TaxJar, Avalara, or Shopify's built-in tax tools. This is a complex area that US-focused Canadian sellers should address proactively.
All net e-commerce income (revenue minus allowable expenses) is taxable — reported on T2125 for sole proprietors or the T2 for incorporated businesses. Key deductible expenses for e-commerce businesses include:
E-commerce businesses benefit enormously from accounting software that integrates with their selling platforms. Top options for Canadian e-commerce sellers:
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