US Canada digital sales tax compared

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How US state sales tax compares with Canadian GST and HST on digital sales

The United States has no national sales tax. Sales tax is imposed by states, and in some states by counties, cities and special districts, which is why the same download can be taxed in Texas and untaxed in New Hampshire.

The rules vary by state. You register with each state's own revenue department — the Texas Comptroller of Public Accounts or the California Department of Tax and Fee Administration, for example — and there is no federal sales tax return to file. That is why a seller can hold six state registrations and still have no filing at all in a seventh.

Canada runs one federal tax and one provincial layer. The federal Goods and Services Tax is 5 percent. Provinces either add their own provincial sales tax on top, or combine both into a Harmonized Sales Tax.

HST is 13 percent in Ontario and 15 percent in Nova Scotia, New Brunswick, Newfoundland and Labrador, and Prince Edward Island. Quebec applies 5 percent GST plus 9.975 percent Quebec Sales Tax.

Alberta, British Columbia, Saskatchewan, Manitoba and the territories have no HST. Alberta has no provincial sales tax at all, so a digital sale to a Calgary buyer carries 5 percent GST only. British Columbia and Saskatchewan charge 7 percent PST and 6 percent PST respectively, Manitoba 7 percent RST, and Quebec its own QST.

For an American seller, the practical difference is the number of tax authorities. A single Canadian registration covers GST and the HST provinces through one federal account.

In the United States, you may hold registrations in several states, each with its own return, its own filing frequency and its own rules on whether a downloaded course, template or membership is taxable at all. The Streamlined Sales Tax Governing Board runs a single registration and remittance route for its member states, and the Multistate Tax Commission coordinates multistate audits, but neither replaces the states' own rules.

That variation is real. Five states have no sales tax at all: Alaska, Delaware, Montana, New Hampshire and Oregon. Others tax digital goods broadly, some tax only specified categories such as prewritten software, and California generally treats a download delivered electronically as outside its sales tax. Texas taxes prewritten software and data processing, so a course seat sold to a Dallas buyer is caught while the same seat sold to a buyer in New Hampshire is not. Our breakdown of digital product sales tax by state tracks which states tax downloads, SaaS and streaming, and which do not.

Rates also change in both the United States and Canada. Canadian provincial rates have moved more than once in the past decade, and US states adjust local rates frequently. Build the rate into your checkout logic rather than a spreadsheet you update by hand.

GST and HST registration thresholds for American sellers

The threshold that matters most to US sellers is Canada's small supplier rule. A business with worldwide taxable revenues of CAD 30,000 or less over four consecutive calendar quarters is generally not required to register for GST/HST. Once you cross that figure, registration is required, and the clock does not restart.

Non-resident sellers count their worldwide taxable sales, not just Canadian ones. A US course creator with USD 40,000 in global sales who sells a handful of seats to Ontario buyers can therefore be required to register, even though Canadian revenue is small.

The threshold is measured on a rolling four-quarter basis, so a strong launch quarter can push you over. Registration is free, and the Canada Revenue Agency issues a business number with a GST/HST program account.

Once registered, you charge GST or HST based on the buyer's province, collect it, and remit it, usually quarterly or annually depending on revenue. The federal rules sit in the Excise Tax Act, and the CRA issues a business number with a GST/HST program account. Under the standard registration you can claim input tax credits on GST/HST paid on Canadian business inputs such as advertising bought from Canadian suppliers. The CRA's simplified registration for non-resident vendors of digital products does not allow those credits, so decide which regime you are using before you charge a buyer.

Digital products are not exempt. Downloads, online courses, memberships, templates and software access are taxable supplies when sold to Canadian consumers. Our guide to GST/HST on online courses covers how course sellers handle this in practice.

There is no equivalent federal threshold in the United States. The framework comes from the Supreme Court's 2018 decision in South Dakota v. Wayfair, which let states tax sellers with no physical presence there. States then set economic nexus rules, often USD 100,000 in sales or 200 transactions in a state in the current or previous calendar year, and some have repealed the transaction test and kept only the dollar figure, Wisconsin among them. Check each state's current threshold before you register or drop a registration.

Customs thresholds and what they mean for digital versus physical goods

Customs is about goods crossing a border, not about where tax is owed. A digital file delivered by download, email link or platform account never passes through a customs port, so no duty and no customs clearance applies to it.

Customs treatment differs between the United States and Canada. The Canada Border Services Agency assesses duty under the Customs Act, with rates set by the Customs Tariff and the tax collected under the Excise Tax Act, and couriers such as Canada Post, UPS and FedEx collect GST/HST plus a handling fee on delivery. Three figures cover most small shipments. Under the Postal Imports Remission Order, a postal item is duty-free up to CAD 20 and relieved of GST/HST up to CAD 40. Under CUSMA, a courier shipment is duty-free up to CAD 150, with the same CAD 40 tax relief. Commercial imports above those values need a formal entry.

The United States applies its own de minimis rule: Section 321 of the Tariff Act of 1930, at 19 U.S.C. § 1321 and 19 CFR 10.151, lets a shipment valued at USD 800 or less per person per day enter free of duty and federal tax without a formal entry. Above USD 800, duty applies. US sellers shipping physical products to Canada should expect the buyer to pay GST/HST and duty on delivery unless the shipment falls inside the Canadian reliefs above.

This matters for bundles. If you sell a course plus a printed workbook, the workbook is a good crossing the border and the course is not. Customs value is the price paid for the goods actually shipped, so invoice the workbook separately and show the digital portion as a non-dutiable charge instead of folding it into the customs value.

Customs thresholds are separate from registration thresholds. Crossing a customs threshold does not trigger GST/HST registration, and registering for GST/HST does not change how a parcel is cleared.

For digital-only sellers, the customs question usually disappears entirely. Your obligations sit with tax registration and reporting, not with border agencies.

Export and import license questions for cross-border digital sellers

Most digital exports from the United States do not need a license. The federal government's own starting point is its guidance on how to get an export license or permit, which explains when one is required and which agency handles it.

Licenses usually attach to controlled goods, technology with military or dual-use applications, and sanctioned destinations. Selling an online course to a Canadian buyer is generally not a controlled export, but encryption software, certain technical data and restricted-party sales can be.

Screen your buyers against restricted-party lists if you sell anything technical. Payment processors and platforms run their own checks, but the legal responsibility sits with the seller.

On the Canadian side, importing a digital product or a physical good can raise permit questions. The US government's parallel guidance on how to get an import license or permit is written for imports into the United States, and Canada runs its own permit system for restricted goods.

Federal tax obligations are separate from licensing. The IRS business hub at Businesses | Internal Revenue Service covers entity types, employer identification numbers and filing obligations for US sellers with foreign income, including foreign tax credit questions when you pay Canadian GST/HST.

If you sell investment-related digital products or make earnings claims, securities and advertising rules add another layer. The FTC's disclosure rules for affiliate marketing and the SEC's rules on investment claims both apply to US sellers regardless of where the buyer lives.

Place-of-supply rules on both sides of the border

Place-of-supply rules decide which jurisdiction gets to tax a sale. Canada's rule for digital products sold to consumers is straightforward: the supply is made where the buyer's address is, generally the address the seller has on file, such as a billing address or IP evidence.

That means an Ontario buyer pays 13 percent HST even if the seller is a sole proprietor in Ohio. A British Columbia buyer pays 5 percent GST plus 7 percent PST, collected through the federal registration for the GST portion and through BC's separate registration for PST.

US states use destination sourcing too. The sale is sourced to where the buyer is. A seller with economic nexus in Texas therefore collects Texas tax on a sale to a Dallas buyer. She collects nothing for Texas on a sale to a buyer in a state where she has no nexus.

Some states use origin sourcing for intrastate sales, and some have special rules for digital goods that differ from tangible goods. That is why two sellers with the same revenue can have different registration lists.

Platforms complicate this. Marketplace facilitator laws now exist in every state that levies a sales tax, so the platform is the deemed supplier and collects and remits the tax on marketplace sales. Amazon, Etsy, eBay and Walmart Marketplace do this on your behalf; a store you run yourself on Shopify does not, and you stay the seller responsible for registration and collection. Canada applies its own deemed-supplier rules to large distribution platforms such as Amazon. Our comparison of delivery platform fees covers how those fees and collection duties differ across the main US platforms.

Worked example: selling an online course to buyers in Ontario and Texas

Assume a US sole proprietor in Ohio sells a USD 200 online course. In one quarter she sells 40 seats to buyers in Ontario and 30 to buyers in Texas. Total revenue is USD 14,000, all digital, delivered by platform login.

First, nexus. She has no Ohio sales tax on these sales because the buyers are elsewhere, and Ohio tax applies to Ohio buyers. Texas is a destination state, so if she has crossed Texas economic nexus, she collects Texas state and local tax on the 30 Texas sales. If she has not crossed it, she collects nothing for Texas.

Second, Canada. Her worldwide taxable revenue over four quarters is well above CAD 30,000, so she must register for GST/HST. She charges 13 percent HST on the 40 Ontario sales, which is CAD or USD converted at the CRA's accepted rate.

Third, the tax split. On a USD 200 Ontario sale, HST at 13 percent is about USD 26. On a USD 200 Texas sale with an 8.25 percent combined rate, tax is about USD 16.50. The Ontario buyer pays more tax, but the seller remits it to one federal account rather than a state plus local combinations.

Fourth, customs. Nothing crosses a border, so no duty, no brokerage fee and no customs entry. The only cross-border work is registration, invoicing with the right tax label, and remittance.

Fifth, records. She keeps the Ontario sales report from her platform, the CRA registration number on invoices, and the Texas taxable sales report. If she later adds a printed workbook, the workbook shipments become customs questions and the digital seats do not.

Records and filing when you sell into both countries

Keep four record sets: US state taxable sales by state, Canadian taxable sales by province, exemption or zero-rating evidence, and platform reports that reconcile to your bank deposits. Store them for the period each authority requires, which in Canada is six years from the end of the tax year.

Filing calendars in the United States and Canada do not align. Canadian registrants file the GST/HST return on form GST34, or the simplified return if they registered as non-resident vendors. US filings go to each state's own authority — Texas, for example, files through the Comptroller's Webfile, due the 20th of the month following the period — and every other state sets its own deadline and frequency. Canadian GST/HST returns have their own deadlines and a different fiscal year end option. Put both on one calendar.

Currency conversion trips people up. The CRA expects Canadian dollars, and the exchange rate you use should be consistent and documented. Keep the rate you applied to each period.

If you sell through a marketplace that collects tax, keep the platform's tax reports anyway. You may still need them to show which sales were taxed by the platform and which were yours.

Your store setup affects how clean this gets. Our cost comparison of shopify vs woocommerce digital products looks at which checkout handles multi-jurisdiction tax and which pushes more of the work onto you.

Whatever platform you use, test a Canadian checkout before you launch. Confirm the invoice shows the right tax label, the right rate and your registration number. If you sell digital products to US buyers as well, our guide on whether you need to charge sales tax on digital products covers the state-by-state starting point.

Common questions