FAQ - Application of the GST/HST in relation to electronic commerce supplies

General Information

1. On November 30, 2020, the Government of Canada announced a number of proposed GST/HST measures relating to the digital economy. Generally, what are those measures and what is their overall effect?

Three GST/HST measures were proposed in the announcement. As explained in greater detail below, the three measures are related to:

• Cross-border digital products and cross-border services;
• Goods supplied through fulfillment warehouses in Canada; and
• Platform-based short-term accommodation.

The current GST/HST rules can often result in the GST/HST not being required to be collected on online purchases from non-resident vendors or made through digital platforms. Generally, the proposed measures will result in the GST/HST being required to be collected on these types of purchases that are considered under the proposed measures to be for consumption in Canada.

2. When are the measures proposed to become effective?

Generally, the proposed measures would start to apply on July 1, 2021:

• The digital products and services measure, and the short-term accommodation measure, would apply to the affected supplies to the extent that the consideration for these supplies becomes due on or after July 1, 2021, or is paid on or after that day without having become due.
• The fulfillment warehouse measure would apply to the affected supplies made on or after July 1, 2021, and to those made before July 1, 2021 if all of the consideration becomes due on or after July 1, 2021, or is paid on or after that date without having become due.

The Government is seeking stakeholders’ views and comments on the three proposed measures and is inviting interested parties to submit comments on the proposals and the associated draft legislation by February 1, 2021, at: fin.gsthst2020-tpstvh2020.fin@canada.ca.

3. The proposed measures refer to platforms. What does this mean?

Generally, a digital platform would be a website, an electronic portal, gateway, store or distribution platform or any other similar electronic interface, but would exclude an electronic interface that solely processes payments.

Generally, a distribution platform would be a digital platform through which a person facilitates the sales of property or services of third-party vendors, such as goods or mobile apps (also sometimes referred to as an online marketplace). An accommodation platform generally means a digital platform through which a person facilitates the making of supplies of short-term accommodation.

A distribution platform operator or accommodation platform operator in relation to supplies made through the platform is generally the person (other than the supplier) that either controls or sets the essential elements of the transaction between the supplier and the customer. If no such person exists, it is a person who is involved, directly or through arrangements with third parties, in collecting, receiving or charging the consideration for the supply and transmitting all or part of the consideration to the supplier.

Information For Businesses

4. What businesses would be affected by the measure relating to cross-border digital products and cross-border services?

Under the proposed measure, non-resident vendors supplying digital products or services (such as online subscription-based video streaming and including traditional services such as legal and accounting services) to consumers in Canada would generally be required to register for the GST/HST and to collect and remit the tax on their taxable supplies to Canadian consumers.

Distribution platform operators would generally be required to register for the GST/HST and to collect and remit the tax on the supplies of digital products and services (such as mobile apps) made by non-resident vendors to Canadian consumers that these digital platforms facilitate.

5. What businesses would be affected by the measure relating to goods supplied through fulfillment warehouses in Canada?

Under the proposed measure, distribution platform operators would be required to register under the normal GST/HST rules and to collect and remit the GST/HST in respect of sales of goods that are located in fulfillment warehouses in Canada (or shipped from a place in Canada to a purchaser in Canada), when those sales are made by non-registered vendors through distribution platforms.

Non-resident vendors would be required to register under the normal GST/HST rules and to collect and remit the GST/HST in respect of sales of goods that are located in fulfillment warehouses in Canada (or shipped from a place in Canada to a purchaser in Canada), when those sales are made by the non-resident vendors on their own (i.e., they are not made through a distribution platform).

Fulfillment businesses in Canada would be required to notify the CRA that they are carrying on a fulfillment business and to maintain records regarding their non-resident clients and the goods they store on behalf of their non-resident clients.

6. What businesses would be affected by the measure relating to platform-based short-term accommodation?

Under the proposed measure, the GST/HST would apply on all supplies of short-term accommodation in Canada facilitated through accommodation platforms.

The GST/HST would be required to be collected and remitted on short-term accommodations supplied in Canada through an accommodation platform by either the property owner or the accommodation platform operator.

7. Can you provide me additional information regarding the proposed measure relating to digital products and services?

Generally, under the proposed measure a simplified GST/HST registration and remittance framework would be available to non-resident vendors and non-resident distribution platform operators that are required to register and collect the GST/HST under this proposed measure.

Key features of this proposed new simplified system for the non-resident vendors and non-resident distribution platform operators would include:

• The availability of a simplified online registration and remittance system in relation to their affected supplies.
• A requirement to collect and remit the GST/HST on their affected supplies to consumers only, and not on their supplies to businesses (the GST/HST registration number of the customer would be considered to be proof of their business status).
• Generally, the affected supplies would be subject to the GST/HST based on the consumer's usual place of residence in Canada. This determination would be based on specified indicators, such as the home address, billing address, Internet Protocol address of the device used, bank or payment information, and subscriber identification module (SIM) card that relate to the recipient. Generally, a consumer’s usual place of residence would be considered to be in Canada when two or more of these indicators identify Canada as the consumer’s normal location or residence. Where two or more of these indicators are not available to determine the usual place of residence of a consumer, the Minister of National Revenue would be able to authorize an alternative method of making the determination.
• There would be no entitlement to claim input tax credits for the GST/HST on business inputs, unless the vendor or platform decides to register under the normal GST/HST registration rules.
• Non-resident vendors that make or are expected to make over a 12-month period more than $30,000 in taxable supplies of digital products or services to consumers in Canada would be required to register under the simplified GST/HST registration system. Excluded from this threshold would be supplies that are facilitated by a distribution platform operator that is registered for the GST/HST (under either the normal or simplified registration system) and that is deemed to have made the supply. Non-resident distribution platform operators would be required to register under the simplified GST/HST registration system where they make or are expected to make over a 12-month period more than $30,000 in taxable supplies of digital products or services to consumers in Canada. Included in this threshold would be supplies of digital products or services made by non-resident vendors to consumers in Canada that the operator facilitates.

8. Can you provide me additional information regarding the proposed measure relating to fulfillment warehouses?

Generally, under the proposed measure, duties and taxes would continue to apply to the importation of goods for storage in a fulfillment warehouse or any other place in Canada for subsequent sale and delivery to a purchaser in Canada, and on goods that are sold and shipped from outside Canada directly to a purchaser in Canada.

A distribution platform operator would be a person (other than the supplier of the goods) that controls or sets the essential elements of the transaction between the third-party vendor and the purchaser, or if no such person exists, it would be a person that is involved, directly or through arrangements with third parties, in collecting, receiving or charging payment for the sale and transmitting payment to the third-party vendor. However, a distribution platform operator would not include a person that operates a website that simply allows vendors to list their goods for sale, such as a classified or advertising website, or is solely a payment processor.

Distribution platform operators (whether resident or not) would be deemed to be the supplier in respect of sales they facilitate by non-registered vendors (whether resident or not) of goods that are located in fulfillment warehouses in Canada or shipped from a place in Canada to a purchaser in Canada.

Distribution platform operators would be deemed not to have made a supply to the non-registered third-party vendor of services relating to the deemed supply of goods made through the platform.

GST/HST relief would be provided under the drop shipment rules where a non-registered non-resident provides a certificate to a service provider or vendor of goods acknowledging that a registered distribution platform operator was deemed to sell the goods and required to collect tax.

To assist the CRA in the administration of the GST/HST, distribution platform operators would be required to report information to the CRA on the third-party vendors using their platforms.

Non-resident vendors that make sales of goods that are located in fulfillment warehouses in Canada (or shipped from a place in Canada to a purchaser in Canada) without the use of a distribution platform, such as by offering and selling the goods through their own website directly to Canadians, would also be required to register under the normal GST/HST rules if their total affected supplies to purchasers in Canada that are not registered for the GST/HST (e.g., consumers) exceed or are expected to exceed $30,000 over a 12-month period.

To assist the CRA in the administration of the GST/HST in respect of sales made by non-residents through fulfillment warehouses in Canada, persons carrying on a fulfillment business in Canada would be required to notify the CRA that they are carrying on a fulfillment business and maintain certain records on their non-resident clients. A person would be considered to carry on a fulfillment business if they provide services of storing goods in Canada (other than services that are incidental to a freight transportation service) that are offered for sale by non-resident persons.

9. Can you provide me additional information regarding the proposed measure relating to accommodation platforms?

Generally, the GST/HST would apply to all taxable supplies of short-term accommodation in Canada that are facilitated by an accommodation platform operator. The rate of the GST/HST that applies is determined based on the province in which the short-term accommodation is situated. Underlying third-party suppliers of short-term accommodation that are registered would continue to be required to account for the tax on their supplies that are facilitated by an accommodation platform operator.

Generally, under the proposed measure:

• The operator of an accommodation platform that facilitates the supply of short-term accommodation by third parties that are not registered, would be deemed to be the supplier of the accommodation for purposes of the GST/HST.
• An accommodation platform operator would be a person (other than the supplier of the accommodation) that controls or sets the essential elements of the transaction between the third-party vendor and the customer. If no such person exists, the operator would be a person that is involved, directly or through arrangements with third parties, in collecting, receiving or charging the consideration for the supplies of short-term accommodation in Canada and transmitting all or part of the consideration to the third-party vendor. However, an accommodation platform operator would not include a person that operates a website that simply allows vendors to list their properties for short-term rental, such as a classified or advertising website, or is solely a payment processor.
• Accommodation platform operators that facilitate or expect to facilitate over a 12-month period more than $30,000 in taxable supplies of short-term accommodation in Canada where the underlying third-party suppliers of the accommodation are not registered, would be required to register and collect and remit the GST/HST on such supplies.
• Accommodation platform operators that are registered would be deemed not to have made a supply of services that relate to facilitating the supply of accommodation to non-registered third-party property owners/suppliers of short-term accommodation in Canada.
• Accommodation platform operators would be required to collect the GST/HST at the rate for the province in which the short-term accommodation is situated on service fees/commissions they charge to guests for the services they provide in assisting the guest to find and book short-term accommodation.

10. Would non-resident accommodation platforms also be able to use a simplified registration and remittance system?

Yes, non-resident accommodation operators that are not carrying on business in Canada would be able to use a simplified registration and remittance system. Key features of this proposed new simplified system for the non-resident accommodation operators would include:

• The availability of a simplified online registration and remittance system in relation to their affected supplies where the underlying third-party property owners/suppliers are not registered.
• A requirement to collect and remit the GST/HST on their affected supplies to consumers only, and not on their supplies to businesses (the GST/HST registration number would be considered to be proof of their business status).
• There would be no entitlement to claim input tax credits for the GST/HST on business inputs, unless the platform decides to register under the normal GST/HST registration rules.

Information For Consumers

11. Under the proposed measures, as a Canadian consumer will I now have to pay the GST/HST on my subscription to a non-resident online platform that streams movies and TV shows?

Yes, generally, effective July 1, 2021, such digital platforms would be required to register and collect the GST/HST from you on their digital supplies made to you as a Canadian consumer.

12. Under the proposed measures, as a Canadian consumer will I now have to pay the GST/HST on my purchases of digital products such as apps and music from non-resident online platforms?

Yes, generally, effective July 1, 2021, such digital platforms would be required to register and collect the GST/HST from you on such supplies that they make to you as a Canadian consumer, and on such supplies made by non-resident vendors to you that they facilitate through their platform.

13. Under the proposed measures, as a Canadian consumer will I now have to pay the GST/HST on goods that I purchase from non-registered vendors through online platforms that are shipped to me at my home in Canada?

Yes, generally, effective July 1, 2021, such digital platforms would be required to register and collect the GST/HST from you on such goods that are supplied to you through their platforms and shipped to you in Canada.

14. Under the proposed measures, as a consumer will I now have to pay the GST/HST on short-term accommodation in Canada that I acquired from a non-registered property owner through a digital platform?

Yes, generally, effective July 1, 2021, such digital platforms that are accommodation platforms would be required to register and collect the GST/HST from you on such supplies of short-term accommodation in Canada that are made to you through their platform.

Additional Information

15. Where can I obtain more information regarding the proposed changes? Will the CRA be releasing additional technical information regarding the proposed measures?

Additional information, including the related draft legislation, can be found in the announcement. The CRA is committed to providing taxpayers with up-to-date information.

The CRA will be releasing more detailed technical information regarding these proposed measures in the near future. Persons seeking additional technical information regarding the proposed measures can contact the CRA by calling GST/HST Rulings at 1-800-959-8287, and may also request a written technical explanation from GST/HST Rulings. The CRA also encourages taxpayers to check its website.