News & Insights

GST/HST Simplified Registration System and E-Commerce Measures Launched

Tax Development Sep 08, 2021

The federal government recently launched several e-commerce measures, including a GST/HST simplified registration system. Effective July 1, 2021, non-resident vendors and distribution platform operators that supply taxable digital products or services to Canadian consumers must register under the simplified GST/HST registration system (if not registered under the general rules) where sales to Canadian consumers exceed or are expected to exceed $30,000 over a 12-month period.

Similarly, effective July 1, digital accommodation platform operators (e.g., Airbnb and VRBO) are required to register for and collect GST/HST on nearly all supplies of short-term rentals made through their platforms where they facilitate, or expect to facilitate, the supply of more than $30,000 in taxable short-term accommodations in Canada on behalf of unregistered suppliers over a 12-month period. For this purpose, platform operators may register under the simplified system where they do not carry on business in Canada and are not required to register for GST/HST under the general rules.   

Distribution platform operators (resident or not) will be required to register for GST/HST under the normal provisions and collect tax on sales of goods in Canada made through their platforms by unregistered vendors (resident or not) where the products are located in a fulfillment warehouse in Canada or shipped from a Canadian location. The distribution platform operator will be deemed to be the supplier when the platform’s involvement in a sale by an unregistered vendor exceeds simple advertising or payment processing. Additional information on these measures is available in the Federal Fall Economic Statement 2020.

Suppliers registered under the simplified system are not required to collect tax on taxable supplies made to GST/HST registrants (i.e., non-consumers). In addition, GST/HST charged by registrants under the simplified system is not eligible to be claimed as an input tax credit (ITC) or rebate. To avoid the payment of GST/HST on purchases from simplified system registrants, a customer must provide its GST/HST registration number to the supplier. GST/HST registration numbers may be validated using the GST/HST Registry on the Canada Revenue Agency website.

Taxpayers are cautioned that an exposure may occur where a purchaser is registered for GST/HST under the general rules but is nonetheless charged tax by a vendor registered under the simplified system. While registrants are generally entitled to claim ITCs for GST/HST paid in relation to their commercial activities, ITCs may not be claimed for GST/HST charged under the simplified system, even when it has been collected in error. In this situation, the purchaser can currently only recover the tax by requesting a refund from the simplified system supplier. It is worthwhile to note that entities charging non-recoverable GST/HST will appear in the GST/HST registry as valid registrants.

In the event of an audit, ITCs claimed for GST/HST paid to simplified system registrants will likely be disallowed. A searchable listing of registrants under the GST/HST simplified registration system is available at the following link: Confirming a simplified GST/HST account number

Non-resident vendors and platform operators that register under the simplified system are also not entitled to claim ITCs for any GST/HST paid. For this reason, organizations with significant expenditures in Canada may want to consider voluntarily registering for GST/HST under the general rules. Quebec has already indicated that these same measures will be implemented for QST purposes.  

Further details on the simplified registration system and other e-commerce measures are available at the following link: GST/HST for digital economy businesses