Hey, Canadian dropshipper! Whether you’re crushing it on Shopify, Amazon, or Etsy—or just thinking about starting—knowing dropshipping taxes in Canada is key. Taxes might seem tricky, but I’m here to keep it simple. As a CPA who’s helped loads of e-commerce folks, I’ll show you how taxes work for dropshipping, from GST/HST for dropshipping in Canada to income tax for dropshipping businesses, and even dropshipping taxes between Canada and US. At SAL Accounting, we’ve got your back—we’ll cover what you owe, how to handle it, and tips to save some cash. Ready to jump in with a chill, no-worry feel?
Table of Contents
Quick Takeaways
- GST/HST: You don’t pay GST/HST until $30k in sales—then register, charge by province, file returns yearly/quarterly/monthly, and keep records for 6 years.
- Income Tax: Income tax for dropshipping businesses is just on your profits—you can lower it by deducting stuff like ads.
- Cross-Border: You pay GST/HST on imports (reclaimable with ITCs) and US sales tax if sales hit $100k in a state.
- Tools: Tools like QuickBooks or Xero help you stay organized and avoid slip-ups.
What Taxes Do Canadian Dropshippers Face?
Taxes keep your dropshipping business on the right track. Before we dive in, let’s get you clued in on what’s coming your way. As a Canadian dropshipper, three main tax areas will show up. Knowing these now makes the rest a breeze:
- GST/HST: The sales tax your customers pay—you collect it and send it to the Canada Revenue Agency (CRA).
- Income Tax: What you owe on profits after expenses, filed on your personal or business return.
- Cross-Border Taxes: Extra bits like import duties or US sales tax if you’re buying or selling across borders.
Think of this as drawing your store’s money plan—getting it sorted early saves you stress down the road. Canada’s e-commerce market hit about $81 billion in 2023, per Statista, with strong growth from 2022, says Oberlo. That’s a big chance to shine! Let’s check out each one, starting with GST/HST.
How GST/HST Works for Dropshipping in Canada
GST/HST is the sales tax your customers see at checkout—you collect it and send it to the Canada Revenue Agency (CRA). It’s straightforward once you get the hang of it. Let’s walk through the essentials for dropshipping in Canada.
➜ Read more: “EIN for Canadian Companies”
Understanding GST/HST and PST Basics
GST is a 5% tax everywhere in Canada. Some provinces mix it into HST at 13% or 15%, or add PST or QST instead. You don’t collect GST/HST until you make $30,000 a year—around $7,500 every three months, says the Excise Tax Act, s. 148. Under that, you’re a “small supplier” and can skip it. Over $30k? Sign up in 30 days at CRA’s Business Registration Online for a Business Number. The rate depends on where your stuff goes—check “place of supply” in GST/HST Memorandum 3.3—and Shopify can handle it if you set it up.
Here’s how it breaks down:
| Tax Type | Rate | Where It Applies | Total with GST | Registration Threshold | Example |
| GST | 5% | Alberta, BC, Manitoba, Territories | 5% | $30k (GST/HST) | $100 speaker to Alberta = $5 GST, total $105 |
| HST | 13% | Ontario | 13% | $30k (GST/HST) | $100 speaker to Ontario = $13 HST, total $113 |
| HST | 15% | Nova Scotia, NB, NL, PEI | 15% | $30k (GST/HST) | $100 speaker to Nova Scotia = $15 HST, total $115 |
| PST (BC) | 7% | British Columbia | 12% | $10k to BC residents | $50 toy = $2.50 GST + $3.50 PST, total $56 |
| PST (SK) | 6% | Saskatchewan | 11% | Any amount | $50 toy = $2.50 GST + $3 PST, total $55.50 |
| PST (MB) | 7% | Manitoba | 12% | $10k to MB residents | $50 toy = $2.50 GST + $3.50 PST, total $56 |
| QST (QC) | 9.975% | Quebec | 14.975% | $30k to QC residents (non-res) | $50 toy = $2.50 GST + $4.99 QST, total $57.49 |
Example: Picture this; you’re selling cool phone cases online. In your first three months, you make $10,000. Then you have a great second quarter and make another $20,000. That’s $30,000 total! Now you need to register for GST/HST within 30 days and start collecting these taxes on everything you sell going forward.
Filing and Sending GST/HST
File based on your revenue—yearly, quarterly, or monthly—and send it via My Business Account, per GST/HST Memorandum 2.4. Here’s how it works:
- Yearly filing – Due April 30 if your revenue is under $1.5M.
- Quarterly filing – Due June 15 (Q1), September 30 (Q2), and December 31 (Q3) if your revenue is $1.5M to $6M.
- Monthly filing – Due monthly if your revenue tops $6M.
Example: Let’s say over three months, you collect $500 in GST selling jewelry online. When the quarter ends, you just log into your CRA My Business Account by July 31st and send that $500 in. Keep your books tidy each month, and this will take you less than half an hour to do.
| Case Study: GST/HST Relief for New DropshipperThe Problem: A young dropshipper came to me in a panic. “I just realized I hit $45K in sales three months ago and never registered for GST/HST! Am I in huge trouble with the CRA?” Their Shopify store selling eco-friendly products had taken off faster than expected.What We Did: I see this happen more than you’d think with new sellers. We immediately helped them register for GST/HST and set up proper tax collection in Shopify. In my experience, coming forward voluntarily makes a big difference with the CRA. I created a simple spreadsheet to calculate what they should have collected and guided them through a voluntary disclosure. I always tell my clients that fixing tax issues early saves a ton of headaches later.The Result: The CRA accepted the voluntary disclosure without penalties, saving them about $2,700 in potential fines. “I was losing sleep thinking I’d have to shut down my business,” they told me recently. They now spend just 15 minutes a month on tax stuff instead of worrying. |
➜ Read more: “GST/HST Return in Canada: A Guide for Businesses & Cross-Border Taxation“
How Income Tax Works for Dropshipping in Canada
Income tax for dropshipping businesses is what you owe—based on profits after expenses. It’s personal for most starters, so let’s keep it easy.
Understanding Income Tax
As a sole proprietor, you report on your T1 return. Canada’s rates go up as you earn more:
| Income Range | Federal Rate | Combined Rate (Approx.) |
| Up to $47,630 | 15% | 20-25% (varies by province) |
| $47,631 – $95,259 | 20.5% | 30-35% |
| $95,260 – $147,667 | 26% | 35-40% |
| $147,668 – $210,371 | 29% | 40-45% |
| Over $210,371 | 33% | 45-54% |
Example: Say you’re running your outdoor gear shop from Vancouver and made $60,000 profit last year. You’ll pay 15% tax on the first $47,630 (that’s $7,145), plus 20.5% on the rest of your money ($2,528). That’s $9,673 in federal tax, plus about 5% to BC. And good news – since you work for yourself, you can file by June 15 instead of April 30.
🌟 Pro Tip: Making over $50k regularly? Think about incorporating—sole proprietors hit up to 54%, but corporations get 9% federal plus 0-3.2% provincial on the first $500k, per Income Tax Act, s. 125. Our business incorporation services can help you structure your business for maximum tax advantages.
Saving Cash with Deductions
Deductions cut what you owe by subtracting business costs from your income. Think about this: Your fitness gear shop made $40,000 last year. You spent:
- $1,000 on Google Ads
- $240 on Shopify
- $300 on shipping
That’s $1,540 in business costs you can subtract! This drops your taxable income to $38,460 and saves you about $385 in taxes. Keep receipts for stuff like rent, software, and ads—QuickBooks organizes it all for you. Also, our Shopify accounting services can help catch tax-saving opportunities for your Shopify business.
How Dropshipping Taxes Between Canada and US Work Across Borders
Selling or sourcing across borders? Dropshipping taxes between Canada and the US bring extra steps—let’s split it into imports and exports. If you’re dealing with complex cross-border issues, our cross-border tax accountants can help you handle both Canadian and US tax systems.
Importing Stuff into Canada
Imports from China or elsewhere mean GST/HST and duties—sometimes called VAT on dropshipping in broader terms. Under $20 CAD is duty-free; US goods up to $150 CAD too, per the Canada-US-Mexico Agreement. Duties range 0%-35%—clothing’s often 18%.
Example: Say you’re bringing in phone chargers from China for your online store. For a $100 order, you’ll pay $5 GST and $10 in duties, so $115 total. But here’s the good part: If you’re registered for GST/HST, you get that $5 back on your next tax return through something called an Input Tax Credit.
🌟 Pro Tip: Stick to $20 AliExpress items early to skip duties while you try things out.
| Case Study: Cross-Border Tax Savings for Growing SellerThe Problem: An established dropshipper came to us importing electronics from the US and China while selling to both Canadian and American customers. “I feel like I’m paying tax twice on everything! I’m sending so much money to the CRA that I can barely stay profitable.” They were paying over $3,500 monthly in GST/HST on imports but not claiming any of it back. What We Did: This is one of the most common mistakes I see with cross-border sellers. We immediately set them up with proper ITC tracking in QuickBooks. I personally walked them through how to document every import to maximize their claims. We also reviewed their nexus situation in the US and found they were needlessly collecting tax in states where they had no obligation. The Result: Their very first GST/HST return with proper ITCs got them a $10,200 refund! We also stopped unnecessary US tax collection in 7 states. “I had no idea I was leaving this much money on the table,” they told me. Their business now runs with about 11% less tax burden overall, which they’ve used to lower prices and win more customers. |
Selling to the US and Beyond
Selling to the US? You might owe state sales tax if you’ve got a “nexus”—a US warehouse or sales over $100k in Texas. No nexus, no tax.
Example: Imagine you’re selling handmade jewelry to California customers and making $150,000 a year. If you’re working from your home in Toronto with no inventory in the US, you don’t have what’s called a ‘nexus’ there. Good news: You don’t have to collect that 8.5% California sales tax. But if you start storing your products in a US warehouse, you’ll need to collect that tax right away. Check Avalara’s nexus guide for more info.
For exports, keep customs docs like Form B3—handy for ITCs, per GST/HST Memorandum 4.5.1.
➜ Read more: “How Does The Tax Treaty Work Between Canada And The US?“
Exchange Rates: Keeping It Simple
Selling in USD? Switch it to CAD with the Bank of Canada’s rate on the sale day. A $100 USD gadget at 1.35 CAD is $135 CAD—even if it changes later.
🌟 Pro Tip: Xero does this for you.
Tax-Saving Hacks for Dropshipping in Canada
Here’s how to keep more cash in your pocket with some smart moves—timing, tools, and credits.
Timing Your Expenses and Income
Timing can shrink your tax bill. Near the end of the year, if your profit’s getting close to a higher tax bracket, spend a bit—like on ads—before January to keep it lower and save some cash. Or, if your sales are almost at the GST/HST cutoff, push a sale to next year to delay collecting it.
Example: Timing’s a smart way to pay less—plan it with your calendar and cash flow.
Using Tools to Catch Deductions
Tools snag more savings by tracking costs. 60-70% of e-commerce revenue is deductible, per CRA stats. Here’s a quick rundown of handy tools:
| Software | Best For | Starting Price | Key Features |
| QuickBooks | Expense tracking | $25/month | Shopify sync, receipt capture |
| Xero | Cross-border sellers | $13/month | Multi-currency, auto-rates |
| TaxJar | Multi-province sales | $19/month | Tax rate automation, filing reminders |
🌟 Pro Tip: Try free trials to catch misses and cut errors. Amazon sellers face unique tax challenges—our top Amazon seller bookkeeping services help you maximize deductions while staying compliant.
Claiming Input Tax Credits
Input Tax Credits (ITCs) give you back GST/HST you’ve paid—a nice bonus for dropshipping. If you’re registered for GST/HST, you can claim ITCs on stuff you buy, like imports or expenses—it’s in the Excise Tax Act, s. 169.
Say Mark imports $1,000 of yoga mats and pays $50 GST. He sells them for $1,500, collects $75 GST from customers, and sends $25 to the CRA—keeping the $50 he paid. File yearly by April 30 if under $1.5M via My Business Account. You’ve got 4 years to claim; missing $200 monthly could’ve been $2,400 yearly.
🌟 Pro Tip: Check your receipts every month—don’t miss out on ITCs.
Common Tax Mistakes Hitting Canadian Dropshippers
Let’s avoid traps even sharp dropshippers hit.
Missing Income You Owe
Selling on Shopify, Amazon, or Etsy? If you miss some cash—like $10k of your $35k total from an Etsy payout—the CRA might audit you. They check 5-8% of small businesses, and that mistake adds a 1% monthly interest penalty.
Fix: Connect all your platforms to Xero. It keeps your sales straight and avoids surprises.
| Case Study: Multi-Platform Seller Avoids Audit NightmareThe Problem: A dropshipper with stores on both Shopify and Amazon came to me in a panic. “The CRA just contacted me about an audit. They say my reported income doesn’t match what Amazon paid me!” They’d been manually tracking sales and missed almost $24,000 in Amazon payouts over the year. What We Did: I see this mistake all the time with sellers on multiple platforms. We immediately pulled reports from all their selling channels and compared them to their bank deposits. I found that their Amazon payments were going to a separate account they weren’t tracking properly. We quickly organized all their documentation and prepared a revised return. I always tell my clients that the CRA already knows what you’ve been paid through their data-matching programs – you can’t hide it, so it’s better to get ahead of problems. The Result: We filed an amended return before the audit began in earnest, which reduced penalties. Instead of potential fines of $7,800, they paid just $2,100 in interest and penalties. “I thought I might lose my business over this,” they told me last week. We set them up with automatic sales tracking across all platforms using Xero, and now they spend just 10 minutes weekly confirming their numbers. |
Forgetting PST Payments
Sending stuff to BC or Quebec without collecting PST or QST? If you sell over $30k there, you’ve got to register, per Revenu Québec. Messing up means 1% monthly fines.
Fix: Look up each province’s rule (BC/MB $10k, SK any amount, QC $30k) and set your platform to collect it automatically. Remember GST/HST isn’t PST—they’re different things.
Missing ITC Cash-Back
Not claiming Input Tax Credits (ITCs) is like tossing cash away—it’s the GST/HST you’ve paid on imports and expenses that you can get back. About 60-70% of your revenue could be deductible, according to CRA stats. You’ve got 4 years to claim that money, so don’t let it slip by. Plus, hang onto receipts, import docs like Form B3, and expense records for 6 years—the CRA says so in their “Keeping Records” guide to keep you in the clear.
Fix: Check receipts monthly with QuickBooks and send ITCs with your GST/HST return.
➜ Read more: “6 E-Commerce Accounting Errors That Could Cost You Thousands“
Checklist – Your Tax Basics
Here’s your quick to-do list:
- Under $30k: Skip GST/HST registration.
- Track Income: Log all earnings with 6-year records.
- $30k+: Register at CRA’s Business Registration Online.
- Collect GST/HST: Grab GST/HST and ITCs.
- $50k+: Send GST/HST and prep for audits.
- US Sales: Check nexus rules and keep Form B3 docs.
Final Thoughts
Figuring out dropshipping taxes in Canada keeps your business smooth and puts more cash in your pocket. Get a handle on GST/HST for dropshipping in Canada, deal with income tax for your dropshipping gig, and sort out taxes between Canada and the US. Wondering how taxes work for dropshipping or what VAT’s about? I’ve got you covered—use ITCs, deductions, and hacks to save money while sticking to Canadian tax rules. Need help with Shopify sales tax or filing for your dropshipping hustle? Our ecommerce bookkeepers are ready to help—just book a free consultation and start your journey!
FAQs: Your Top Tax Questions
You start collecting GST/HST when your sales hit $30k over four quarters. Below that, you’re a “small supplier” and don’t need to bother yet. It’s like a free pass until you grow bigger.
You pay GST/HST on imports, plus duties that can range from 0% to 35%. If you’re registered, ITCs let you get that GST/HST back. It’s a way to avoid double-paying taxes.
Yes, you can deduct costs like Google Ads, Shopify fees, and shipping. Just keep those receipts handy to prove it. It’s an easy way to lower your tax bill.
It’s where your stuff ends up, not where you are. Alberta gets 5% GST, Ontario gets 13% HST, and so on. Your sales platform can usually sort this out.
If you’re over $30k and don’t register, you’ll face 1% monthly interest penalties. Signing up keeps you out of trouble with the CRA. It’s better to play it safe than sorry.
Yes, if your sales hit a nexus like $100k in a state, you collect their sales tax. No nexus means no extra tax to worry about. It depends on how big you go in the US.
Keep sales receipts, invoices, and import docs like Form B3 for 6 years. It’s what the CRA expects to check your books. Having them ready avoids headaches later.
