Preparing for the implementation of HST

[coxengines]

I am curious to hear how sellers (such as Pierre) that absorb the taxes for their Canadian customers will approach the HST issue.

We have always absorbed the taxes. With only 2% of our sales being to Canadian residents, absorbing the 5% GST was no big deal. Absorbing the 7% PST for the BC portion (under 20% of Canadian sales) was also no big deal, especially after subtracting the vendor commission.

However, the HST will apply to all Canadian sales. With around 200k annual sales between our 2 stores, it's now around $500 that we have to absorb. Still no big deal but wondering what others are going to do.

Our US-based competitors now all have (with one exception) identical pricing to us. Since their shipping costs are the same as ours, 12% price difference might drive business their way, although the cross-border issue might keep Canadians buying from us.

Bernie

[recped]

Well I'm not one of the "absorbers" but I'll toss my opinion out anyway.

It's not MY job to hide taxation done by our Governments. Like you, my portion of taxable sales is tiny and the amounts I collect equally tiny but that's not an issue as far as I'm concerned.

I did once have a Canadian customer who was adamant that they would not pay GST at least if they would it would only be to a "real business". It was actually quite hilarious, the final threat was that I would be reported to her brother the police officer!

I took a neg on that one and and gave one out in return.

Did I mention it's was for a $2.99 cd with $1.75 shipping and I guess at that time 7% gst (33 cents).

[pierrelebel]

"However, the HST will apply to all Canadian sales"

Not really.

Effective July 1st, for sellers in BC or Ontario, HST will apply to taxable sales in BC and ON in addition to NL, NS and NB which currently have HST (no change).

Taxable sales to other provinces (PE, QC, MB, SK, AB) and Territories will continue to be taxable at the 5% GST rate.

Overall, yes it represents an increase in the tax "expense" for sales within those provinces.

The real problem I have noticed recently is a relative increase in the number of Canadian buyers - caused by a higher Canadian dollar.

More Canadian buyers - more tax to absorb 😞

HST in some provinces instead of GST - more tax to absorb 😞

Higher Canadian dollar in relation to US$ - lower net realizations. 😞

It will be challenging. In July, I expect to increase some prices ever so slightly on listings with a higher percentage of Canadian buyers to maintain profit margins.

[coxengines]

Correct, Pierre, I had forgotten that not all provinces "subscribe" to the HST. The impact will be lower than I anticipated.

With a COG under 5%, we are fortunate in that we can absorb the HST. What really affects us is the CAD/USD exchange rate. But then, we should not be complaining as we bought almost all our inventory when the FX rate was 1:1.

As 50% of our sales are to outside of North America destinations, I would love to list in Euros but then we have the Yanks 🙂 (no disrespect intended). The whole world seems to able to "think" in alternate currencies but it does seem to present a challenge to our friends south of the border.

Bernie

[dipmicro]

Sales tax is not much of an issue for most Canadians. Out of 10,000+ orders we had one customer who had issue with charging tax and it was something below $10 if I remember correctly.

Just charge explicit tax like everyone else and offer incentives, like "no PST this weekend" if you can absorb it and turn sales tax into marketing machine.

[pierrelebel]

"tax like everyone else...."

That is the problem.

Many of us compete with individuals (not businesses) selling identical items. They are not registered as businesses and do not need to collect/remit taxes.

It is a business decision to absorb consumption taxes to remain competitive. That decision does have a cost. And life does go on.

[momoftwingles2]

Correct, Pierre, I had forgotten that not all provinces "subscribe" to the HST. The impact will be lower than I anticipated.

With a COG under 5%, we are fortunate in that we can absorb the HST. What really affects us is the CAD/USD exchange rate. But then, we should not be complaining as we bought almost all our inventory when the FX rate was 1:1.

As 50% of our sales are to outside of North America destinations, I would love to list in Euros but then we have the Yanks 🙂 (no disrespect intended). The whole world seems to able to "think" in alternate currencies but it does seem to present a challenge to our friends south of the border.

Bernie

Hi Bernie,

You are most correct about the States and their ability to think in different currencies. When I lived in Virginia Beach it was DIFFICULT to exchange money into another currency and or back to US unless we went to the main branches of banks sometimes 2 - 4 hours away. However, if one lives in/or around New York City area, Chicago or other huge cities...it's a no brainer! Their banks can handle it with ease. Most certainly depends on where one lives!

Susan

[coxengines]

Yes, Susan, I have found it the same as you state.

I guess it's a big country and they have become accustomed to the fact that one can pay in USD in almost every country, not to mention that some countries have adopted their currency.

And when resources and precious metals are quoted in USD on markets worldwide, then we can't blame them for not seeing the need to "think" in other currencies.

As for the HST, we have decided to absorb it for Canadians. The hassle of collecting outweighs the few $$'s we have to absorb. Due to the lack of Small Packet availability, we are already charging Canadians $9.95 postage for something we charge the rest of the world only $5.95 for and we would like them to continue buying "Canadian".

Bernie