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Tax Collection for Marketplace Sellers in Canada: Essential Facts

All over the world, marketplace sellers and facilitators of online marketplaces are increasingly facing tax rules specifying the duties of each party participating in the sale. Among countries that have different regulations for marketplace taxation, is Canada and its Marketplace Tax Collection (MTC).

The MTC rules in Canada outline in which cases an online marketplace provider (i.e. Amazon) becomes responsible for collecting and remitting sales taxes in Canada for the products uploaded by the seller on the online marketplace.

Whether the MTC applies to the seller depends on what product is sold, where it is shipped from and to, and whether the seller has provided tax registration to the online marketplace.

If the Marketplace Tax Collection is applicable, then the marketplace calculates, collects, remits, and refunds sales tax on behalf of the seller. In Canada, the amount of the taxes depends on the buyer’s jurisdiction, as there are federal and provincial sales taxes in place. Among the jurisdictions where MTC applies are British Columbia, Manitoba, Saskatchewan, and Quebec.

Whenever MTC is not applied, sellers are responsible for collecting taxes based on the sales made through the online marketplaces. It is worth mentioning that even when MTC is applied, sellers may have continuous tax reporting obligations to the Canadian tax authorities. It is also important that MTC only covers the sales taxes and not the income or other taxes that might apply.

If a seller places its products on Amazon and the sales are eligible for the MTC, no special action should be taken. However, depending on the tax registration status of the seller, their company might have to report the taxes. Amazon provides an MTC statement so that the seller doesn’t have to calculate the MTC taxes manually. No fee is charged for the MTC.

So that the MTC process is correct, the seller has to regularly review and update the product listings and their business details.

Are you selling via a marketplace and have questions about the MTC? Do you have doubts about the correctness of the MTC? Then, reach out to our tax experts at 1stopVAT and get answers promptly.