As the global economy continues to move online, more businesses are leveraging marketplaces to reach both local customers and those across borders. In Canada, regulators levy indirect taxes at the federal and provincial levels. Offering products or services through online platforms adds another layer of complexity to navigating tax compliance for all parties across provinces and territories.

Who is responsible for collecting sales tax – the marketplace or the seller? The answer depends on a range of factors, including the location of every person participating in the transaction, the product or service being sold, the kind of tax registration completed by the seller and the platform, as well as the volume of sales made by the marketplace and the seller.

This guide explains the ins and outs of tax compliance for both marketplaces and businesses operating in Canada. We define important terms, explain the nuances of the federal and provincial tax structures, and outline the responsibilities and requirements that accompany operating in this market as a business.

A brief overview of Canada’s tax system

At the federal level, the Canada Revenue Agency (CRA) manages compliance with the national goods and services tax (GST). Five provinces (New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island) merged their provincial taxes with GST to create harmonised sales tax (HST). GST/HST includes both provincial and federal taxes.

Four provinces collect their own sales tax under different names:

• British Columbia: provincial sales tax (PST)
  
• Manitoba: retail sales tax (RST)
  
• Quebec: Quebec sales tax (QST)
  
• Saskatchewan: provincial sales tax (PST)
  

One province, Alberta, and three territories – Northwest Territories, Nunavut, and Yukon – do not apply any provincial sales tax.

Defining the relevant terms

Language used in GST/HST legislation

In Canada, it’s common to refer to marketplaces as platforms colloquially and in the tech industry. Formally, Canadian regulations use the term “digital platform” to refer to intermediaries that might have tax collection obligations. Their definition of a digital platform includes a website, an electronic portal, gateway, store, or distribution platform or electronic interface – with the exception of a platform that solely processes payments. Canadian tax law divides digital platform operators into two groups:

• Distribution platform operators: These facilitate the supply of digital products, services, and goods.
  
• Accommodation platform operators: These facilitate short-term accommodation rentals.
  

The government defines distribution and accommodation platform operators as businesses that control or set the key elements of the transaction between a third-party vendor and a purchaser.

If that definition doesn’t apply, a platform operator can also be involved directly or through third parties in collecting, receiving, charging, or transmitting all or part of the payment for the goods or services. In Canada, the law distinguishes between these activities and a website that solely allows vendors to list their goods for sales (classifieds or advertising), or functions solely as a payment processor – neither of which fits within the definition of a platform operator.

Province-level definitions

The four provinces that collect their own sales tax have their own language to describe marketplaces:

• British Columbia: marketplace facilitators
  
• Manitoba: online sales platform
  
• Quebec: distribution platform and accommodation platform
  
• Saskatchewan: operators of electronic distribution platforms, marketplace facilitators, and operators of online accommodation platforms
  

Three of these provinces describe and define marketplaces differently, although Quebec uses the same language and definition as federal legislation.

British Columbia defines a marketplace facilitator as a person who operates, owns, or controls an online marketplace jointly or on their own. Through the marketplace, they facilitate a seller’s retail sales of goods, software, or taxable services – which includes accommodation but excludes legal services. Marketplace facilitators collect payment for the retail sales of goods, software, or taxable services.

Manitoba defines an online sales platform as a website, app, or other internet-based marketplace that enables the retail sale of goods or taxable services, as well as the collection of payment on behalf of an online seller. This definition includes marketplaces that supply local, on-demand delivery of restaurant meals, and other items, as well as platforms that facilitate accommodation rental in Manitoba. Platforms that only provide classified advertising or listing services but do not collect payment are not classified as online sales platforms in the province.

Saskatchewan breaks down marketplaces with tax obligations into three categories:

• Marketplace facilitators make or facilitate retail sales directly or indirectly, collecting payment from a customer and remitting it to a marketplace seller.
  
• Online accommodation platforms enable transactions for accommodation in Saskatchewan. (The definition does not include solely classified advertising or listing services that do not collect payment on behalf of sellers.)
  
• Electronic distribution platforms, which include websites, internet portals, gateways, or applications that allow a customer to purchase tangible personal property or services delivered in an electronic format.
  

Scope of marketplace tax collection obligations

GST/HST

At the federal level, both resident and foreign platform operators must collect GST/HST on the following sales to Canadian customers:

• Business-to-consumer (B2C) sales of digital products and cross-border services offered by sellers outside of Canada who have not registered under the normal GST/HST regime.
  
• Business-to-business (B2B) and B2C sales of goods by non-registered vendors (both resident and non-resident) to Canadian customers if the goods are located in Canada at the time of the sale.
  
• Sales of short-term accommodation in a residential complex or unit (for less than one month) if the property owner isn’t registered for GST/HST.
  

Provincial sales taxes

The scope of platform tax liability might differ at the provincial level, and some provinces require platform operators to collect tax on all taxable retail sales. Each of the four provinces that sets its own tax rates has its own regulations about marketplace sales to local customers.

British Columbia requires marketplace facilitators to collect and remit PST on retail sales of the following:

• Goods located within Canada at the time of sale that are sold to a person in British Columbia
  
• Software used on an electronic device primarily located in the province
  
• Local accommodation
  
• Taxable services, other than legal services, offered to a person in British Columbia
  

Quebec requires platform operators to collect and remit QST on:

• B2C sales of digital products and cross-border services made by sellers outside Quebec who are not registered under the general QST system
  
• B2C sales of goods already located in Quebec by suppliers outside the province not registered under the general QST system
  
• B2C sales of goods shipped from outside Quebec and delivered to customers in Quebec – other than by post or courier – by suppliers outside the province not registered under the general QST system
  
• Short-term accommodation if neither the supplier nor the recipient are registered with the general QST system
  

In Manitoba, online sales platforms need to collect and remit RST on all retail sales they facilitate. The provincial government makes one exception for the leasing of motor vehicles obtained through an online sales platform. In this case, the platform does not need to remit tax on the leased vehicle, other adjacent taxable services, or insurance contracts related to the lease if the seller remits all sales tax.

In Saskatchewan, PST applies to electronic distribution services, accommodation services, and all retail sales facilitated by marketplace facilitators.

Additional tax liability for marketplaces

Some platform operators also have to collect additional taxes or fees, depending on the product or service sold. For example, marketplaces might be required to collect additional tax on lodgings in Quebec and also in British Columbia, where it’s called Municipal and Regional District Tax (MRDT).

Tax registration

GST/HST

A platform operator based in Canada needs to register with the CRA under the normal GST/HST regime. Registration is required if a platform’s total taxable supplies exceed $30,000 CAD over a 12-month period, and third-party sales count toward the platform operator’s threshold. If a platform operator is based abroad and facilitates sale of goods already in Canada, it must register with normal GST/HST rules.

Canada created a simplified GST/HST registration and remittance process for non-resident platform operators. This simplified registration process applies to both accommodation platform operators and distribution platform operators facilitating cross-border sales of digital products and services. Platform operators only need to register if the sales of these services to Canadian customers exceed the threshold of $30,000 CAD in a 12-month period.

Provincial sales tax

Quebec has implemented similar registration rules to those that apply at the federal level. Canadian platform operators and non-resident platform operators facilitating sales of goods located in Quebec must all register with the normal system if ​​the value of their taxable sales is more than $30,000 CAD for a 12-month period. Other non-resident platform operators may apply for a simplified registration if their sales exceed the $30,000 CAD threshold.

British Columbia, Manitoba, and Saskatchewan do not provide for simplified registration mechanisms. Businesses must register to collect PST if their taxable sales in British Columbia exceed $10,000 CAD in the past 12 months or are expected to exceed that amount in the next 12 months. There are no registration thresholds in Manitoba and Saskatchewan. For provincial tax purposes, marketplace-facilitated sales count toward the platform operator’s threshold and not toward the seller’s threshold.

Tax reporting obligations

GST/HST

Platform operators required to register for simplified GST/HST must file a simplified GST/HST return. The same idea applies to normal GST/HST. Businesses and individuals registered for normal GST/HST must file regular GST/HST returns with Form GST34-2. When platform operators facilitate the sale of short-term accommodation or goods already located in Canada, they might have additional federal-level obligations.

Federal-level regulators are also implementing new reporting regulations for local and foreign digital platform operators. New laws that took effect at the beginning of 2024 require that platform operators collect and report information about sellers, including their tax identification number and the total remuneration paid to the seller per quarter. Accommodation platforms are also liable to report the address of the rented property and the number of days it was rented during the year. The first reporting deadline for new regulations is 31 January 2025.

Provincial sales tax

Manitoba, Saskatchewan, and British Columbia all require platform operators to file regular tax returns. Quebec’s laws echo the federal-level regulations with two types of requirements: regular or simplified QST returns, with platform operators submitting additional information about sales of goods located in Quebec and short-term accommodation.

Liability for incorrectly calculated tax

GST/HST

Platform operators are not responsible for errors in collecting or remitting sales tax if third-party suppliers made false statements or mistakes in reporting essential information to marketplaces.

Provincial sales tax

Individual provinces in Canada do not have any legislation addressing whether the liability of incorrectly calculated sales tax rests with sellers or platform operators.

Invoicing considerations

GST/HST

Platform operators registered to collect and remit GST/HST must follow general invoicing requirements, which have no specific rules for marketplaces. Canadian law requires they include both the price of goods and services and the cost of GST/HST, either combined in one total or separately listed in receipts, invoices, or contracts.

Provincial sales tax

There are no special province-level invoicing rules that apply to platform operators in Canada.

Marketplace sellers

Tax registration

When a seller based outside of Canada only offers their goods and services through platform operators that are required to collect tax on these sales, the seller does need to register for GST/HST in Canada. When determining whether they hit registration thresholds, sellers abroad should exclude sales made through marketplace operators. The same principle applies to provincial-level tax registration.

Sellers based in Canada are subject to the general tax registration rules. A business must register for GST/HST if it has annual taxable sales of goods and services in Canada exceeding $30,000 CAD over four consecutive calendar quarters. Even if the business does not meet the mandatory registration threshold, it can choose to register voluntarily.

Tax liability

At the federal level in Canada, if a third-party seller provides false information to a platform operator that leads to incorrect tax remittance, both parties may have a joint and several GST/HST liability.

In Quebec, if a platform operator is registered for QST, the seller is not responsible to collect QST. However, the seller must ensure that the platform operator is registered for QST to be relieved of tax obligations.

Likewise, Saskatchewan relieves sellers of PST tax liability if sales take place through a platform operator that holds a valid PST licence or collects Saskatchewan PST on sales of taxable goods and services made through its platform. The seller must check to ensure that the platform operator takes responsibility for PST collection and remittance to be relieved of liability. However, in British Columbia, a seller is jointly and severally liable for any PST not collected and remitted by the marketplace facilitator in relation to the marketplace seller’s sales.

Tax reporting obligations

If a platform operator is required to collect GST on sales that it facilitates, the seller does not have to include these sales in their tax return.

How Stripe can help

Stripe empowers digital platforms to build and scale powerful global payments and financial services businesses with less overhead and more opportunities for growth. Stripe Tax reduces the complexity of global tax compliance so you can focus on growing your business. It automatically calculates and collects sales tax, VAT, and GST on both physical and digital goods and services in all US states and more than 40 countries. Stripe Tax is natively built into Stripe, so you can get started faster – no third-party integration or plug-ins are required.

Stripe Tax empowers digital platforms

• Understand where to register and collect taxes: See where you need to collect taxes based on your Stripe transactions. After you register, switch on tax collection in a new state or country in seconds. You can start collecting taxes by adding one line of code to your existing Stripe integration or by adding tax collection to Stripe no-code products, such as Invoicing, with the click of a button.
  
• Register to pay tax: Stripe Tax provides links to the websites where you can register once you meet a province’s tax registration requirement.
  
• Automatically collect sales tax: Stripe Tax calculates and collects the amount of tax owed. It supports hundreds of products and services, and it is up-to-date on tax rule and rate changes.
  
• Simplify filing and remittance: With our trusted global partners, users benefit from a seamless experience that connects to your Stripe transaction data – letting our partners manage your filings so you can focus on growing your business.
  

Learn more about Stripe Tax.