If you’re an international e-commerce seller expanding into Canada, one of the first decisions you’ll make is whether to import inventory into Canada for local fulfillment or ship orders directly to Canadian customers from outside the country.
While both models can work, the tax implications can be very different.
Local Fulfillment: Import Inventory into Canada
Many Amazon FBA, Walmart Marketplace, and Shopify sellers choose to import inventory into Canada and store it in a Canadian warehouse or fulfillment centre.
This approach often provides faster shipping, a better customer experience, and potential tax advantages.
When inventory is imported in bulk, GST is generally paid when the goods enter Canada. If your business is registered for GST/HST, this import GST is typically recoverable through Input Tax Credits (ITCs).
Depending on your inventory locations and sales activity, you may also need provincial tax registrations in provinces such as British Columbia, Saskatchewan, Manitoba, or Quebec.
Cross-Border Fulfillment
Cross-border fulfillment involves shipping orders directly to Canadian customers from inventory stored outside Canada, often in the United States.
While this can reduce inventory carrying costs, sellers should understand the tax implications.
Duties and taxes are generally assessed on the customs value of each shipment. In many cases, the value used for direct-to-consumer shipments may be closer to the customer’s purchase price than the wholesale value associated with bulk inventory imports.
As a result, taxes paid on individual shipments can sometimes be higher than those incurred when inventory is imported in bulk for local fulfillment.
Why DDP Shipping Is Important
If you fulfill orders cross-border, it is generally recommended to ship using Delivered Duty Paid (DDP) terms.
With DDP shipping, the seller pays duties and taxes upfront rather than requiring the customer to pay upon delivery.
This helps avoid:
- Unexpected charges for customers
- Customs-related delivery delays
- Refused shipments
- Negative marketplace reviews
For most e-commerce businesses, providing a seamless customer experience is worth the additional administrative effort.
Recovering Taxes Paid at the Border
When a properly registered seller acts as the Importer of Record, federal GST or the federal portion of HST paid at import may generally be recoverable through Input Tax Credits.
However, provincial sales taxes paid on imports into provinces with separate provincial tax systems are generally not recoverable through GST/HST filings. This includes:
- British Columbia PST
- Saskatchewan PST
- Manitoba RST
- Quebec QST
These unrecoverable provincial taxes can significantly increase the true cost of cross-border fulfillment.
Which Model Is Better?
For many growing e-commerce businesses, importing inventory into Canada for local fulfillment offers several advantages:
- Faster delivery times
- Improved customer experience
- Recoverable import GST through ITCs
- Reduced exposure to unrecoverable provincial sales taxes
- Better positioning for growth in the Canadian market
Cross-border fulfillment can still be an effective strategy for testing the market or managing lower sales volumes, but sellers should carefully evaluate the long-term tax and compliance costs.
Need Help with Canadian Tax Compliance?
Canadian Sales Tax Solutions specializes in GST/HST registration, provincial sales tax registrations, tax filings, import GST recovery, audit support, and ongoing Canadian tax compliance for non-resident e-commerce sellers.
Whether you sell through Amazon, Walmart Marketplace, Shopify, or your own website, we can help you understand your obligations, recover eligible tax credits, and stay compliant as your Canadian sales grow.
Contact us today to discuss your Canadian sales tax compliance needs: