Tax Implications of Selling From Canada to the US (And Vice Versa): What Cross-Border Sellers Should Know

Expanding your business across the US–Canada border can open up exciting growth opportunities. 

However, it also introduces a maze of tax rules, forms, and filing obligations that can overwhelm even seasoned sellers.

Sales tax, GST/HST, customs duties, and registration thresholds can vary significantly depending on where your customers are and where your business has nexus.

That’s why every cross-border seller must understand the tax implications of selling from Canada to the US (and vice versa) to stay compliant and protect their profits. 

If you need help keeping up with changing rules, doola’s Sales Tax & Reseller Certificate Services have got you covered.

We help cross-border sellers register, file, and stay compliant, whether you sell on Shopify, Amazon, or your website.

In the meantime, let’s break down everything you need to know about US state sales tax laws and Canadian GST/HST registration rules.

Cross-Border Selling 101: Key Differences Between Canada and US Tax Systems

Many e-commerce sellers assume that crossing the border simply means converting prices to USD and handling a few extra shipping logistics. But the reality is far more complex.

Let’s say you run a Shopify brand in Toronto and start selling into the US. You might assume your GST/HST registration will cover it all. 

Then, you get a letter from a US state asking why you haven’t registered for sales tax. That’s when you realize that you have to collect and pay taxes in the US as well.

However, the US and Canada operate on two very different tax frameworks. Let’s get into the details:

Canada’s CRA requires you to register for GST/HST and begin collecting tax once you have made CAD 30,000 or less in taxable revenue over four consecutive calendar quarters. 

In the US, you meet the criteria if you meet its economic nexus rules, which usually mean $100,000 or more in sales in that state or 200+ separate transactions in a calendar year.

Canada’s GST/HST system is relatively straightforward since it’s consistent across most of the country.

The US, however, is a patchwork. There’s no national sales tax. Instead, each state sets its own rates, rules, thresholds, and deadlines. 

If you’re not aware of how these systems work, you could end up non-compliant, overpaying, or leaving money on the table. 

Canada lets businesses claim Input Tax Credits (ITCs) to recover GST/HST paid on business expenses like software subscriptions, packaging, or fulfillment costs.

In contrast, the US system offers no such refund. You cannot recover it unless you are a tax-exempt reseller with documentation.

For sellers operating in both countries, planning with proper bookkeeping and sales tax compliance is necessary to keep their margins healthy.

Selling from Canada to the US: Do You Need to Collect US Sales Tax?

Think you’re too small to deal with US sales tax? Think again. Many Canadian entrepreneurs assume that because they’re based outside the US, sales tax doesn’t apply to them. 

But in reality, you don’t need to have an office, employee, or warehouse in the US to be on the hook because of nexus.

According to the South Dakota v. Wayfair, Inc. decision, US states can require out-of-state and international sellers to collect sales tax based on their economic activity in that state.

In plain terms, if you’re a Canadian seller making $120,000 in sales to Texas in a year, even without setting foot in the US, you’ve created a nexus in Texas and register for sales tax there.

Let’s take an example of a Canada-based Shopify brand that sells handmade soy candles. Over the past year, 30% of its sales have come from California.

They reported over $105,000 USD in gross sales in California alone. Since they exceeded the $100,000 revenue threshold, they have economic nexus in California. 

So, they have to register for a California sales tax permit, collect California sales tax from customers, and file regular sales tax returns.

Here are a few other scenarios that trigger sales tax registration:

• High Sales Volume to a Specific State: Your business could quickly exceed that state’s economic nexus threshold even if your total US sales seem small.

• Using US-Based Fulfillment Services (Like FBA): You may trigger physical nexus, which also requires sales tax registration in any state where your goods are stored.

• Selling Digital Products or Subscriptions: If you sell downloadable digital products, e-books, online courses, or SaaS, you might owe sales tax in states like Washington or Pennsylvania.

Even if you haven’t yet triggered an economic or physical nexus, you may still choose to register voluntarily in some states. 

Voluntary registration doesn’t mean you’re obligated to collect in every state; just the ones you opt into.

This will help you:

• Build trust with customers: Many buyers, especially on platforms like Amazon and Etsy, prefer sellers who charge and remit sales tax.

• Enable faster fulfillment: Registering in advance lets you store inventory in the US and tap into fulfillment networks without risking surprise tax obligations later.

• Prepare for growth: If you’re close to hitting a nexus threshold, getting ahead of the paperwork now can save a lot of scrambling later.

🔖 Related Read: Crossing Borders: How to Start a Business in the US from Canada

Selling from the US to Canada: Do US Sellers Need to Charge GST/HST?

You’ve got Canadian customers but are you charging them tax correctly? It’s a common blind spot for US e-commerce businesses expanding north of the border. 

The answer depends on how much you’re selling and how you’re selling it. Here’s a quick compliance checklist for US-based sellers entering Canada:

✅ Exceeded $30,000 CAD in revenue

✅ Selling directly to Canadian consumers (not just through marketplaces)

✅ Shipping physical goods into Canada

✅ Offering digital products like eBooks or SaaS

Canadian sales taxes are less complicated than US sales taxes since there is a national sales tax to comply with.

The national sales tax is the 5% GST that applies across the country.

However, some provinces collect a different tax, 13–15% HST in which the GST has been blended with provincial sales tax. 

The majority of goods and services sold in Canada are subject to GST or HST, including tangible and non-tangible goods. 

If you’re shipping tangible goods, the Canada Border Services Agency (CBSA) collects import duties, based on the product category and trade agreements, and GST/HST, based on the destination province.

Even if you sell digital goods or services to Canadian consumers without shipping a physical product, you’re still subject to GST/HST.

However, if you’re selling exclusively through a large marketplace like Amazon or Etsy, they likely take care of GST/HST collection and remittance for you.

These platforms are considered “distribution platform operators” under Canadian law and must collect GST/HST on sales to Canadian consumers.

You may also trigger importation tax obligations if you store goods in a Canadian fulfillment center (e.g., Amazon FBA Canada).

Tax Registration, Filings, and Reporting Requirements

If you’ve made the leap into cross-border selling, you have to be ready for a patchwork of tax registrations, filings, and compliance requirements that can’t be ignored. 

Both countries require formal tax registrations, periodic filings, and strict record-keeping, and if you’re not on top of it, penalties can snowball quickly.

In Canada, this means getting registered for a GST/HST number from the CRA Non-Resident Registration Portal, which covers all provinces where GST or HST applies. 

In the US, you’ll need to register for a sales tax permit in each individual state or use doola’s Sales Tax & Reseller Certificate services to simplify multi-state registration.

Once you’re registered, the real work begins: filing your returns on time. Filing frequency varies based on your sales volume and the rules of each jurisdiction.

Each US state determines your filing frequency after registration. Some states like California, Texas, or Florida are stricter and may require monthly reports even for moderate sales.

In Canada, your filing frequency is assigned by CRA based on your revenue. Monthly filing for sales exceeding CAD 6 million, quarterly for sales between CAD 1.5M–CAD 6M, and annually for sales under CAD 1.5M.

You don’t want to miss any of the filing deadlines, or else you may have to face a tax audit by the authorities.

In the US, audits are conducted by state tax departments and usually triggered by filing inconsistencies, reporting high refund amounts, or failing to collect tax.

In Canada, audits are centralized and handled by the CRA if you’re claiming a large amount of input tax credits (ITCs) inconsistent with your sales, or if you’re filing late. 

When it comes to this, your best defense is documentation. In Canada, the CRA requires businesses to keep all supporting records for at least 6 years after the end of the tax year. 

In the US, most states require record retention for 3-4 years, though some can go back further depending on the case. That includes invoices, contracts, proof of tax collected, ITC calculations, and import/export paperwork.

If you’re ever audited, having clean digital records could be the difference between a quick resolution and a lengthy investigation. 

That’s why it’s smart to keep digital records in one place; ideally backed up in the cloud with an e-commerce bookkeeping system like doola to automate the whole process.

🔖 Related Read: How to open a Mercury US bank account in Canada

Double Taxation, Treaties, and Shipping Duties

Selling across borders doesn’t always mean getting taxed twice. Thanks to tax treaties and smart logistics, double taxation is often avoidable; at least when it comes to income tax. 

If you’re a Canadian seller earning income from US buyers or a US-based brand with customers in Canada, you likely won’t have to pay income tax to both governments. 

Instead, the treaty determines where the tax obligation lies, often based on whether you have a “permanent establishment” (e.g., a warehouse or office) in the other country.

But that doesn’t mean you’re off the hook when it comes to sales tax and duties at the border.

When goods cross the Canada-US border, Customs (CBSA in Canada or CBP in the US) determines whether duties are owed. Who pays these duties? That depends on how you ship.

• In DDP (Delivered Duty Paid), the seller pays all duties, taxes, and import fees up front so buyer gets their order without surprise charges. 

• In DDU (Delivered Duty Unpaid), duties and taxes are not included in the purchase price, and your buyer will have to pay them when the order arrives.

You may also encounter VAT (Value-Added Tax), which is applied at each stage of the supply chain and is usually built into the listed price.

This often confuses US or Canadian sellers used to displaying tax separately. This also includes filing in multiple countries, invoice formatting rules, and reclaiming VAT on business expenses. 

That’s why many cross-border sellers turn to customs brokers or tax consultants like doola, which ensures fewer delays, smoother compliance, and happier international customers.

How doola Simplifies Sales Tax Compliance for Cross-Border Sellers

Between varying thresholds, state-by-state rules, GST/HST obligations, and import duties, it’s easy to feel overwhelmed, or even fall out of compliance.

doola offers an all-in-one sales tax solution that takes care of the paperwork, ensures you meet local thresholds, and handles the entire registration process on your behalf. 

• All-in-One Dashboard: Track your registrations, see which states or provinces you’re live in, and view upcoming filing deadlines from a single, easy-to-navigate interface.

• Smart Automation: Automatically tracks your economic nexus status, keeps tabs on your Canadian revenue for GST/HST, and updates your filing obligations in real-time. 

• E-Commerce & Platform Integrations: doola syncs with major platforms like Shopify, Etsy, WooCommerce, Amazon, and PayPal, making it easy to import data, track nexus, and file accurately.

• Email Notifications & Reminders: Never miss a deadline again. Receive proactive alerts when filings are due, thresholds are reached, or updates are needed.

• Human Support with Real Expertise: doola’s tax experts are available to walk you through complex rules and offer personalized guidance.

This isn’t a DIY tool. It’s a hands-on, done-for-you service backed by real professionals who understand your market, your tools, and the challenges unique to online sellers.

If you’re ever audited? You get audit-ready documentation on demand and our experts will walk you through the process, explain what to expect, and ensure your business stays protected.

🔖 Related Read: Starting a Business in Canada: A Step-by-Step Approach

Simplify Your Cross-Border Tax Compliance With doola

With doola, you’re not just staying compliant; you’re building a business that’s equipped to grow confidently and globally.

From registering in multiple states or provinces, to automating filings and preparing for audits, doola handles the sales tax complexity so you can focus on what you do best. 

You save time by not navigating tax codes, money by avoiding penalties and costly mistakes, and stress by knowing you’re always one step ahead of your compliance obligations.

However, doola isn’t just a backend tax service but a growth enabler. We ensure that you don’t need to be overwhelmed by sales tax thresholds, shifting filing schedules, or audit prep ever again.

With real-time dashboards, expert support, and automation tailored for international sellers, doola clears the path for seamless cross-border expansion. 

Book a demo today and see how doola can take sales tax compliance off your plate.

FAQs

Do I need to register for sales tax in every US state?

No, you have to register only in states where you meet sales tax nexus thresholds or have a physical/logistics presence.

How do I know if I’ve triggered economic nexus in the US?

Track your sales by state; if you exceed a state’s economic threshold, you’re required to register and collect sales tax there.

If I’m already registered in Canada, do I still need to register in the US?

Yes, Canada’s GST/HST system is separate from US state sales taxes. You’ll need to register individually in the US where required.

Are there tools that can automate tax compliance for cross-border sales?

Yes, platforms like doola automate sales tax registration, filings, multi-state compliance, and keep you ahead of deadlines.

Is it worth voluntarily registering for sales tax in a US state?

In some cases, yes, voluntary registration can improve marketplace trust, streamline warehousing logistics, or prepare you for future growth.

How are digital products taxed across the border?

In Canada, most digital products are subject to GST/HST; in the US, taxation varies by state. For instance, some tax digital goods, others don’t.