Online Business GST/HST Rules

Introduction
Understanding online business GST HST rules is essential for e-commerce sellers, digital creators, coaches, consultants, influencers, SaaS businesses, service providers, dropshippers, and anyone selling goods or services over the internet. Whether you run a Shopify store, sell digital downloads, operate a coaching program, or generate income from subscriptions, you may need to collect GST/HST — even if your business never meets a customer in person. CRA has expanded digital taxation rules over the last several years, and marketplace platforms now share seller information directly with CRA. Revenu Québec applies even stricter requirements for QST. Non-compliance can lead to penalties, reassessments, frozen payouts, or forced tax registration. This guide explains everything you need to know about online business GST HST rules.

Legal and Regulatory Framework
Online business GST HST rules are governed by the Excise Tax Act, CRA digital commerce rules, small-supplier thresholds, marketplace facilitator obligations, GST/HST place-of-supply rules, the Québec Taxation Act for QST, digital service provider registration rules, and cross-border sales tax frameworks. Online sellers must also follow platform-specific tax settings on Shopify, Amazon, Etsy, eBay, Patreon, OnlyFans, ClickFunnels, Udemy, and other tools collecting or distributing revenue.

Who Must Register for GST/HST?
Any online business must register for GST/HST once:
taxable revenues exceed $30,000 in any 12-month period, or
the business is expected to exceed $30,000 soon, or
digital or physical products are sold to Canadian customers
The $30,000 threshold applies to worldwide revenues, not just Canadian ones. For incorporated sellers, the threshold applies to the corporation, not the individual.

Online Activities That Require GST/HST Registration
GST/HST applies when online businesses sell:
physical goods (Shopify, Amazon FBA, Etsy, eBay)
digital products (courses, templates, e-books)
downloadable files (presets, guides, software)
coaching programs
memberships and subscriptions
user-generated content
freelancing services
SaaS platforms
influencer services
UGC content creation
If the supply is taxable, GST/HST must be collected once registration is required.

What Counts Toward the $30,000 Threshold?
The threshold includes:
gross sales before expenses
digital sales
subscription revenue
affiliate commissions
online services
coaching
Dropshipping revenue counts as your revenue, even if the supplier ships the product directly to the customer.

How GST/HST Applies to Physical Online Sales
For physical goods shipped within Canada, GST/HST depends on customer location through place-of-supply rules:
Ontario: 13%
BC: 5%
Alberta: 5%
Nova Scotia: 15%
New Brunswick: 15%
PEI: 15%
Newfoundland and Labrador: 15%
Manitoba: 5%
Saskatchewan: 5%
Quebec: 5% GST + 9.975% QST
Online business GST HST rules require accurate tax configuration per province.

How GST/HST Applies to Digital Products
Digital products are taxable unless specifically exempt. Tax must be charged based on customer location, not seller location. Digital product taxes apply to:
e-books
digital templates
software
course downloads
access to membership areas
digital subscriptions
Digital sellers must verify location using billing address or geo-location tools.

Marketplaces and Platform Rules
Marketplace facilitator rules mean platforms may collect GST/HST on your behalf. Examples:
Amazon collects GST/HST on certain FBA orders
Etsy may collect GST/HST for certain sellers
Airbnb automatically collects GST/HST
However, Shopify is not a marketplace facilitator — Shopify sellers must collect GST/HST themselves.

GST/HST for Coaching and Online Services
Online coaching, consulting, and service-based businesses must charge GST/HST once registered. Tax applies to:
coaching calls
group coaching
done-for-you services
brand management
social media services
digital consulting
If the client is located in Canada, GST/HST must be applied. If the client is outside Canada, the service may be zero-rated.

Cross-Border Sales — U.S. and International Customers
GST/HST generally does not apply to:
U.S. customers
international customers
These sales are considered zero-rated exports. However, the seller must still register for GST/HST once the threshold is passed because exports do not affect registration requirements.

QST Requirements for Québec Sellers
Québec requires:
QST registration once revenue exceeds $30,000
charging QST on taxable supplies to Québec residents
filing TP-1 for self-employed sellers
ensuring Shopify/Amazon settings correctly apply QST
Québec audits online sellers aggressively, especially Shopify users mixing personal and business revenues.

Dropshipping and GST/HST
Dropshipping creates unique tax challenges. Even if goods ship directly from foreign suppliers, GST/HST applies based on customer location. Sellers must charge tax on Canadian sales, regardless of fulfillment location. Import GST and customs duties paid by the seller may be deductible.

When GST/HST Does NOT Apply
GST/HST does not apply to:
zero-rated exports
financial services
exempt health services (regulated professionals only)
residential rental income
However, most online income is taxable.

Input Tax Credits (ITCs)
Registered businesses may recover GST/HST on expenses, including:
advertising
Shopify/Amazon fees
subscription tools
shipping and packaging
equipment
professional fees
If the online business is not registered, GST/HST on expenses is not recoverable.

Common Online Business Tax Mistakes
not registering for GST/HST on time
incorrect Shopify or Amazon tax settings
charging the wrong tax rate
not charging QST to Québec customers
mixing personal and business PayPal/Stripe accounts
not claiming ITCs properly
incorrectly classifying export sales
not charging GST/HST on coaching or digital products
CRA can reassess and add penalties plus interest.

Key Court and CRA Positions
CRA considers online businesses the same as physical businesses. Courts support CRA’s enforcement of GST/HST on digital supplies, dropshipping, software, and membership sites. CRA uses third-party payment data (Stripe, PayPal, Shopify Payments, Amazon Seller Central) to verify revenues.

Why CRA and Revenu Québec Audit Online Businesses
rapid sales growth
low reported profit margins
missing GST/HST registrations
incorrect QST filings
large Shopify or PayPal deposits
foreign supplier payments
T1135 mismatches
Revenu Québec and CRA receive platform data annually, making audits frequent for digital sellers.

Mackisen Strategy
Mackisen CPA ensures full compliance with online business GST HST rules. We register businesses for GST/HST and QST, configure Shopify/Amazon tax settings, prepare tax returns, optimize ITC recovery, audit-proof e-commerce reporting, calculate provincial place-of-supply rules, and defend clients in CRA or ARQ audits. We also train businesses on proper invoicing and digital tax compliance.

Real Client Experience
A Montréal Shopify seller failed to charge QST and faced a $35,000 assessment; Mackisen corrected filings and negotiated relief. A coaching business forgot to charge GST/HST; CRA issued a reassessment — we reconstructed invoicing and resolved penalties. An Amazon seller misunderstood marketplace facilitator rules; we fixed tax settings. A dropshipper imported goods without proper GST accounting; Mackisen rebuilt COGS and ITC claims.

Common Questions
Do I need to register for GST/HST if online only? Yes once revenue exceeds $30,000.
Does Shopify collect GST/HST automatically? No — sellers must configure it.
Are digital products taxable? Yes in most cases.
Do I charge GST/HST to U.S. clients? Usually no — zero-rated export.
Do I charge QST to Québec customers? Yes after registration.
Do I pay GST/HST on my supplies? Yes, but ITCs may recover it.

Why Mackisen
With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps online entrepreneurs comply with online business GST HST rules, avoid costly mistakes, and optimize tax outcomes. Whether selling digitally or physically, our expert team provides full compliance, accurate filings, and audit protection.