Etsy Collection of HST/GST tax for all Canadian Sellers regardless if required by law or not

[BramblesandBushes]

I am a Canadian based Etsy shop.   I just received an email from Etsy outlining mandatory collection of Canadian GST/HST taxes on all sales made to Canadian customers.   I am currently exempt under Canadian regulations from remitting taxes as my annual sales are below the required sales volume and given I make everything that I sell, I can’t, and don’t wish, to grow sales to that point.  

Normally I would be pleased that Etsy is taking an administrative step off my plate.  However, Etsy’s action is both forcing me to apply for a tax number (when I don’t need one) and becomes another added cost to my Canadian buyers.  It is also stripping away a sales advantage that the “Feds” had given to small entrepreneurs.  Sigh…..

[BichenVintage]

So true, and many Canadian sellers are in the same boat of not having to collect because of being exempted for sales are below the required sales volume.  Also, I am a vintage seller which means taxes have already been collected historically. Plus Etsy wants to charge HST on listing fees!

[TreeTreasuresCanada]

My understanding.  You are not required to apply for a GST/HST number.  If you do not have a GST number, Etsy will charge Canadian customers the appropriate tax and remit it to the CRA.  If you do have a GST number, customers will be charged but the seller will receive the GST funds and remit same to the CRA. 

For fees, if you do not have a GST number, you will be charged GST on fees.  If you do have a GST number, you won't be charged tax on fees.  (The reason for this is that input tax credits (GST on fees) are deducted from the amount payable for GST registrants so it would be a wash.)

Etsy makes no mention of PST for those of us in provinces with provincial sales tax.

[HintFineJewelry]

Your explanation makes much more sense than the email. Thank you so much! But under the legal and tax information, "your taxpayer ID, still says no information on file" But when I click it, it won't allow me to edit it, it's only available to add on the very bottom "GST optional" So I am guessing if I put the GST # there I am good to go?

[mountainfeathers]

they made merntion of hst gst qst and pst

[Former_Member]

If your shops revenue is under $30k annually you are not required to register for a tax number. What does Etsy do with the tax money they collect? If they send it to CRA how do they identify it without a tax number?

[CleverLittleEars]

That's not quite it though, is it? If we DO have a GST number, Etsy is removing the tool that allowed us to apply shop taxes, so we will need to roll the GST/HST into the price (somehow, even though it is different in every province) and then Etsy will charge PST on top of this, and remit it on our behalf. I've been asking Etsy for clarification for weeks, and this is the best understanding I can come to. 

[SilverCityBeads]

I just received an order where Etsy collected PST on an order in Canada. I am in the USA

[MyWoodenPlayroom]

I'd like to get clarity on the "customers will be charged". Since this change has been implemented, my customers are no longer charged for tax even though I have a GST/HST number added. I spoke to etsy about it and they said they will not charge it or remit it. I have to add it into my listing pricing.

[cindylouwho2]

@MyWoodenPlayroom Etsy is correct - they won't allow us to charge correct GST & HST separately any more. So for every Canadian sale you have had since July 1, you will need to back-calculate the GST/HST you need to remit to the CRA. From here on in, raise your domestic prices to cover it. 

Yes, it is ridiculous and yes, it is impossible to do fairly. I can't link some of the materials here that might help you, but there was an article in the Globe this week on this topic, & I did a long blog post in June. Feel free to contact me if you have any other questions. 

[MrsDsHandKnits · Accepted solution]

It matters not whether sellers are low volume, this is the LAW as of July 1st, all the major selling sites are required to collect sales taxes on the sales transactions, the % is according to the buyer's provincial sales tax. This taxation process isn't about the sellers, this is taxation on transactions of online sales, and it is the buyers that are paying the tax. It does not matter where the seller is located- the taxation is based on the buyer's location.  I expect in the near future ALL selling sites will be held accountable for collecting this sales taxation.

It is the BUYER that pays the sales tax as per their provincial taxation system. Etsy will be collecting those taxes and remitting them as required. Sellers will pay their fees on the TOTAL transaction.

No, Etsy is NOT "forcing" anyone " to apply for a tax number "... It is only an option for sellers who are under the threshold...Etsy only states for you to "consider" this option > " If you don’t have a tax ID yet, consider registering for one as your business grows." For those of us sellers who choose to remain small sellers we can indeed remain in that state without any further action to be taken by either seller or Etsy.

I am already familiar with the new taxation process as eBay made the announcement to Canadian eBay sellers about 3 weeks ago. This Canadian taxation process is really no different than the "internet taxation" as applied in the USA by 45 state gov'ts, whereby buyers pay that USA "internet sales tax" based on their state's sales tax % and sellers pay their fees on the TOTAL transaction, which includes paying fees on the applied taxes. The Canadian taxation process is also applied to the TOTAL transaction, whereby the taxes are paid by the buyer, but the seller will pay the fees on the TOTAL transaction which includes paying the applicable fees on the new taxation process...

[BramblesandBushes]

I appreciate the background information and would have expected that Etsy’s email had been clearer on conditions for exempted and non-exempted Sellers.  I’ll leave tax ID vacant and see how it all rolls out.

[ButternutRidgeStudio]

thanks for the clear summary.  do you know if the GST that Etsy collects from small sellers below the $30K threshold will be linked to the individual seller, or under Etsy's name?  Based on the level of my sales I have no interest in filing complicated tax returns that in the end make no difference to me or CRA.  

[traditionalkatie]

I registered with etsy and gave my HST number. They have been collecting it for me for a number of years. I have now had a thorough look at my finances from etsy and realize that they never returned the tax collected to me, but I did remit the hst taxes in each of my business quarters. What has etsy done with the money they collected for me and did they submit it to CRA.?

[BichenVintage]

Correct, however if you don't exceed 30,000.00 in sales you aren't required to collect HST/PST according to the governmental outline by the CRA.  So in fact Etsy should not be collecting on low volume sales and review every 4 months or reimburse shops on taxes collected held in reserve.  Anyway, guess shops will have to get a feel on how this will pan out!

[cindylouwho2]

@BichenVintage  "Etsy should not be collecting on low volume sales" - again, they are now required to do so, as is true in almost all US states and in many other countries such as the UK and Australia. 

This is not only a legal requirement, it also benefits Canadians who are large enough to have to charge GST, as buyers can't try to evade their tax obligations by buying from a non-registered seller in Canada or elsewhere.

Trust me, I had to fire a repeat buyer for complaining to me about the fact she had to pay me GST, when she didn't have to elsewhere. She made a point of saying how much more she bought from others since they didn't charge her. There are definitely more people like her! 

So I am glad that the feds finally did this, although not looking forward to how Etsy will mess it up LOL

[EasyCraftsCanada]

@cindylouwho2 Same here. I'm very happy that this is implemented. As I have been charging GST/HST already, this helps put me back to a level playing field as those Canadian shops that don't. I'm sure that extra amount for tax to purchase from me has turned many customers away from my store. 

I also am nervous about the bugs and issues that inevitably arise with this task being in Etsy's hands!!   

[TreeTreasuresCanada]

@cindylouwho2   "So I am glad that the feds finally did this, although not looking forward to how Etsy will mess it up LOL"

That is what frightens me, the implementation.  Being in BC, I collect PST on BC sales.  There is no mention how PST will or won't be affected and I doubt that it has even been considered by Etsy.

[EasyCraftsCanada]

@TreeTreasuresCanada At the bottom of their email it says "If you're collecting and remitting your own sales tax to tax authorities, you can use the domestic and global pricing tool to adjust your prices for buyers in Canada." I wonder if they are referring to PST with that statement. If they are referring to PST with this, it's not a good solution because the domestic pricing tool affects the whole country, not just our province.

[EasyCraftsCanada]

@TreeTreasuresCanada Either that, or they are saying if we already have a GST/HST number on file, they won't be charging the buyers this tax, and because they are eliminating the ability to enter our own tax amounts, that we have to just adjust our prices to collect those taxes? I'm not sure and I confess I'm a little confused. The more I read it the more confused and worried I get. 

[TreeTreasuresCanada]

@EasyCraftsCanada   Good point, who knows what Etsy means by that statement?  I think the best plan for me is to just sit tight, cross my fingers and hope for the best.

[EasyCraftsCanada]

@TreeTreasuresCanada Same. That is all we can do for now, no point in getting stressed.... YET lol

[cindylouwho2]

yikes, adjusting prices to include GST for Canadians would be impossible, as the rates range from 5-15%

I assumed that meant they are setting it themselves across the board based on the buyer location, then giving us the GST/HST charged if we have a registration number on file. I could be wrong. @TreeTreasuresCanada  @EasyCraftsCanada 

If anyone contacts Etsy and asks them anything, please clarify this point. 

[EasyCraftsCanada]

@cindylouwho2 And if sellers have to raise prices in order to collect tax, that does not allow for a clear record for buyers. Most of my buyers are businesses who have to account for the tax breakdown for their reporting. That would make no sense whatsoever. Unfortunately things don't have to make sense for them to think it's a great idea.

[cindylouwho2]

@EasyCraftsCanada @KnoxMountainKnitCo  I'll note that the wording you both quoted about adjusting prices is not on my email, nor do I see it anywhere else. I am in Alberta, so no PST to charge. 

This may mean they are going to calculate the GST/HST on our orders just like they will for the unregistered. "Add the tax to the item price" may only affect people who have to charge PST in provinces where Etsy does not have to charge PST on unregistered orders. Which is still ridiculous, but it will mean far few sellers are affected. 

I have a ticket in asking if Etsy is calculating the GST & HST for registered shops; will let you know what I hear back. (However, I got an autoreply that told me my items were removed due to the Prohibited Items policy, so I don't have high hopes for this ticket LMAO! Maybe someone who has access to chat or callback can ask for me...)