It’s been a year of changing dynamics for Canada-US trade. NAFTA renegotiations have dominated headlines in recent months, and now that the new USMCA agreement has been signed, it’s time to revisit a lesser-reported piece of legislation that has pressing implications for Canadian tech companies.
You’ve probably heard by now that on June 21, 2018, the United States Supreme Court delivered the South Dakota v. Wayfair decision—one that could significantly change the way Canadian companies do business with US customers. In short, US states can now obligate companies to collect sales tax when selling goods or providing certain services to US customers while operating out of state, even if they have no in-state physical presence. The decision comes after mounting resistance in recent years against the Quill Corp. v. North Dakota decision, which made physical presence a requirement for states to collect sales tax from out of state vendors. Not every state has passed laws similar to South Dakota yet— but it is just a matter of time for the floodgates to open for further changes.
The immediate consequence of this ruling is obvious; Canadian technology companies may no longer enjoy any price advantages from not having to charge US sales tax compared to brick-and-mortar outlets, which has been a point of contention over the years. Companies far and wide could find themselves newly accountable for state sales taxes, and must prepare accordingly to keep doing business as smoothly as possible.
The potential for increased tax costs and record-keeping requirements may seem like a burden to Canadian companies. However, this is also an incentive to sharpen your operations and do smarter business in what might be your largest market. The companies that educate themselves and take the necessary preparations will be better positioned to stay competitive and thrive in these changing economic circumstances.
At PwC, we care about seeing Canadian businesses succeed. We want to see our companies make the best of sales tax changes, and we understand that providing actionable advice is the best way to help businesses steer through any resulting complications.
Navigating Wayfair means knowing the rules of sales tax, and adapting your business to follow suit. We’ve prepared some tips for Canadian companies:
Of course, the impact from this ruling is still new, and many of the pieces are still being put in place. It’s a fluid situation that will give businesses a lot to think about, and so it’s only natural to wonder how best to approach the new tax requirements. You may already be well-positioned to handle any new tax obligations—it’s just a matter of figuring out what those obligations are.
We’re here to help you take the steps you need to best prepare for any changes in your tax accountability and to become fully compliant. For more information on how we can help your business, contact your local PwC office or get in touch with me directly at firstname.lastname@example.org.