Canadian Sales Tax Guide for US SaaS Companies (2025 Update)

2025-11-11

Registration Threshold

CAD $30,000

Federal Tax Rate

Provincial Rates

13–15% in 5 provinces

Late Registration Penalty

Up to 24%

If you are a US SaaS company selling to Canadian customers, you need to understand how Canadian sales tax works. Since July 2021, Canada has required foreign digital service providers to register and collect sales tax once Canadian sales exceed CAD $30,000 in any 12-month period. This guide explains when to register, how to collect, how to file, and how to avoid penalties.

Last verified: November 2025

When US SaaS Companies Must Register for Canadian Sales Tax

You must register for Canadian sales tax if your Canadian customer sales meet either of the following:

Canadian sales exceed CAD $30,000 in any rolling 12-month period
You expect to exceed CAD $30,000 and begin selling before registration

If you remain under CAD $30,000 annually, you do not need to register.

Reference: Canada Revenue Agency – Digital Economy Businesses

Understanding GST vs HST in Canada

Goods and Services Tax (GST)

Rate: 5%
Applies in: Alberta, British Columbia, Manitoba, Northwest Territories, Nunavut, Quebec, Saskatchewan, Yukon

Example: A CAD $100 subscription in Alberta costs CAD $105 total (100 + 5% GST).

Harmonized Sales Tax (HST)

HST combines the federal GST with a provincial component.

Current HST rates:

Ontario: 13%
Nova Scotia: 14%
New Brunswick: 15%
Newfoundland and Labrador: 15%
Prince Edward Island: 15%

Example: A CAD $100 subscription in Ontario costs CAD $113 total (100 + 13% HST).

Which Rate to Charge

You charge tax based on the customer’s province, not your US business location.

Toronto customer: 13% HST
Calgary customer: 5% GST
Vancouver customer: 5% GST

Determine location using the billing or shipping address.

Reference: Canada Revenue Agency – GST/HST Rates

How US SaaS Companies Handle Canadian B2B and B2C Sales

Same Collection Process

For US suppliers selling from abroad, the process is identical for both business (B2B) and consumer (B2C) customers:

Collect GST or HST at the correct rate
File returns and remit to the Canada Revenue Agency (CRA)
Maintain required records

Difference After Collection

Business to Consumer (B2C)

Customer is an individual or unregistered business
The customer pays the tax you collect and cannot claim it back

Example: A freelancer in Vancouver paying CAD $99 per month. You charge CAD $104.95 total (100 + 5%). The freelancer pays CAD $104.95 and cannot recover the CAD $4.95 tax.

Business to Business (B2B)

Customer is a Canadian business registered for GST or HST
The business can claim an Input Tax Credit to recover the tax

Example: A registered business in Ontario buys your software for CAD $999 per month. You charge CAD $1,128.87 total (999 + 13%). The business claims an Input Tax Credit of CAD $129.87, making its net cost CAD $999.

Why This Matters

You must collect tax from all customers
Business customers may prefer prices shown before tax since they recover it
Business customers may provide their GST or HST registration number for invoices
You can verify registration numbers through the CRA’s registry

Canada does not have a reverse charge mechanism for foreign suppliers. You must collect GST or HST from all Canadian customers.

Reference: Canada Revenue Agency – Digital Economy Businesses

How to Register for Canadian Sales Tax

Choose the Registration Type

Simplified Registration (most US SaaS companies)

For annual revenue under CAD $1 million
Quarterly or annual filing
Cannot claim input tax credits

Normal Registration (larger operations)

For annual revenue over CAD $1 million
Can claim credits for Canadian business expenses
More detailed reporting

Most US companies will use simplified registration.

Get a Canadian Business Number

A Canadian Business Number (BN) is required before registering for sales tax.

Apply online: Business Registration Online

Required information:

US business information (EIN, address)
Expected Canadian sales
Banking information

Processing is usually instant for online applications.

Register for GST or HST

After receiving your Business Number, register for GST or HST indicating simplified registration for digital services.

Format: 9-digit Business Number + RT0001
Example: 123456789RT0001

Reference: Canada Revenue Agency – How to Register

Collecting GST and HST from Canadian Customers

Pricing Options

Tax exclusive pricing (recommended for B2B)

Show price before tax
Add tax at checkout
Example: CAD $100 per month + CAD $13 tax = CAD $113 total

Tax inclusive pricing

Include tax in displayed price
Example: CAD $100 per month (includes tax)

Show tax exclusive pricing to business customers and either option for consumers.

Invoice Requirements

Invoices must include:

GST or HST registration number
Customer name and address
Invoice date
Service description
Amount before tax
Tax amount charged
Total amount

For business customers, include their GST or HST registration number if provided.

Reference: Canada Revenue Agency – Invoice Requirements

Filing and Payment Requirements

Filing Frequency

Simplified registration filing schedule:

Under CAD $1.5 million annual revenue: file annually, due 3 months after fiscal year end
CAD $1.5 million to CAD $6 million: file quarterly, due 1 month after quarter end
Over CAD $6 million: file monthly, due 1 month after period end

How to File

Filing is electronic only.

Methods:

GST or HST NETFILE
CRA My Business Account
Authorized accounting software

Report:

Total Canadian sales for the period
Tax collected by province
Total tax owed
Payment amount

B2B and B2C sales are reported together.

Reference: Canada Revenue Agency – File and Remit

Payment Methods

Electronic payment options:

Pre-authorized debit through CRA
Online banking
Wire transfer

Record Keeping Requirements

Maintain records for 6 years showing:

All Canadian sales (B2B and B2C)
Tax collected by province
Customer location (billing or IP address)
GST or HST registration numbers for business customers
All invoices issued
Returns and credits issued

Reference: Canada Revenue Agency – Business Records

Common Mistakes US SaaS Companies Make

Not monitoring the threshold. Track Canadian sales monthly and register before CAD $30,000.
Charging incorrect rates. Verify the customer’s province to avoid errors.
Assuming B2B customers do not need tax. You must collect for all customers.
Not collecting business registration numbers. Keeping them helps if the CRA questions charges.
Missing filing deadlines. Penalties add up quickly.
Ignoring currency conversion. Convert USD to CAD using the rate on the date of sale.

Reference: Bank of Canada – Exchange Rates

Penalties for Non-Compliance

Failure to register
6% of tax owing plus 2% per month (maximum 24 months)

Late filing
1% of tax owing plus 0.25% per month (maximum 12 months)

Failure to remit
5% of amount owing plus 1% per month (maximum 12 months)

Interest compounds daily on unpaid amounts.

Example: Owing CAD $10,000 and being 6 months late costs approximately CAD $11,650 (original tax plus penalties and interest).

Reference: Canada Revenue Agency – Penalties and Interest

Special Situations

Free trials
Not taxable. Tax applies only once the customer converts to paid.

Marketplace sales
If selling through app stores such as Apple or Google Play, the marketplace handles collection and remittance.

Setup fees
All setup or implementation fees are taxable.

Refunds and credits
Refund the full amount including tax and adjust remittance.

Quebec sales tax
Quebec charges 5% GST plus 9.975% Quebec Sales Tax (QST). Rules are similar but filing requirements differ.

Reference: Revenu Québec

Canada vs US Sales Tax Comparison

Aspect	Canada	United States
Threshold	CAD $30,000 nationwide	Varies by state ($100K to $500K)
Tax rates	Federal + provincial rates (5–15%)	Thousands of state and local rates
B2B vs B2C treatment	Same for foreign suppliers	Usually same
Complexity	Relatively simple	Highly complex
Filing	Quarterly or annual	Varies by state