"To Charge Tax Up Front or To Absorb...."
Interesting and timely question!
When I prepared my budget at the beginning of the year, I planned to close my eBay store on June 26th and re-open July 5th in order to implement whatever decision I make on the subject and allow enough time to make the necessary revisions in my 2,900+ listings.
Only a few weeks away and I have yet to make a decision on that question.
Ever since the GST was implemented nearly twenty years ago, like many of my largest competitors, I have absorbed the GST/HST in my prices (with only a few exceptions). I look at it as a "cost of doing business", similar to advertising, etc... It is a marketing tool.
It was relatively easy to do as "tax included" sales within Canada generally accounted for only 10% to 15% of my total volume so my out-of-pocket cost was less than 1% of my overall sales.
HST (13%) to NL, NS and NB hurt a little more but, since these three provinces account for such a small percentage of the overall total, it was an irrelevant factor.
Two important changes have taken place or will be taking place:
1) With a relatively stronger Canadian dollar in the last two to threee years, Canadian sales have increased as a percentage of the total volume, increasing the cost of absorbing the GST/HST
2) Effective July 1st, registered sellers will have to remit 15% (up from 13%) for taxable sales made to NS, 12% (up from 5%) for sales made to BC, 13% (up from 5%) for sales made to ON.
The net effect of these two changes results in an out-of-pocket cost of several thousand dollars yearly.
The choices:
1) start charging appropriate GST/HST on sales to Canadians
2) increase prices slightly to make up the added cost.
The problem with those choices -
1) Canadians resent having to pay consumption taxes on online purchases and will favour a seller not adding the tax. Many smaller competitors are not GST/HST registered, in fact many are collectors disposing of their collection, and do not face the added cost
2) Raising prices (slightly) across-the-board of all sales to cover the "tax cost" on a percentage of the total adds to risks of becoming uncompetitive on worldwide sales where the tax does not apply.
Stamp dealers face a problem slightly different from most since stamps can be purchased by Canadians from dealers outside the country with negligible risks of having to pay tax(es) at time of importation. First class mail usually goes through Canada Customs without inspection. This inaptitude by Canada Customs to fairly tax all imports makes it a bit more difficult for Canadian sellers to compete on a level playing field.
As stated earlier, I have not yet reached a decision.
Interesting and timely question!
When I prepared my budget at the beginning of the year, I planned to close my eBay store on June 26th and re-open July 5th in order to implement whatever decision I make on the subject and allow enough time to make the necessary revisions in my 2,900+ listings.
Only a few weeks away and I have yet to make a decision on that question.
Ever since the GST was implemented nearly twenty years ago, like many of my largest competitors, I have absorbed the GST/HST in my prices (with only a few exceptions). I look at it as a "cost of doing business", similar to advertising, etc... It is a marketing tool.
It was relatively easy to do as "tax included" sales within Canada generally accounted for only 10% to 15% of my total volume so my out-of-pocket cost was less than 1% of my overall sales.
HST (13%) to NL, NS and NB hurt a little more but, since these three provinces account for such a small percentage of the overall total, it was an irrelevant factor.
Two important changes have taken place or will be taking place:
1) With a relatively stronger Canadian dollar in the last two to threee years, Canadian sales have increased as a percentage of the total volume, increasing the cost of absorbing the GST/HST
2) Effective July 1st, registered sellers will have to remit 15% (up from 13%) for taxable sales made to NS, 12% (up from 5%) for sales made to BC, 13% (up from 5%) for sales made to ON.
The net effect of these two changes results in an out-of-pocket cost of several thousand dollars yearly.
The choices:
1) start charging appropriate GST/HST on sales to Canadians
2) increase prices slightly to make up the added cost.
The problem with those choices -
1) Canadians resent having to pay consumption taxes on online purchases and will favour a seller not adding the tax. Many smaller competitors are not GST/HST registered, in fact many are collectors disposing of their collection, and do not face the added cost
2) Raising prices (slightly) across-the-board of all sales to cover the "tax cost" on a percentage of the total adds to risks of becoming uncompetitive on worldwide sales where the tax does not apply.
Stamp dealers face a problem slightly different from most since stamps can be purchased by Canadians from dealers outside the country with negligible risks of having to pay tax(es) at time of importation. First class mail usually goes through Canada Customs without inspection. This inaptitude by Canada Customs to fairly tax all imports makes it a bit more difficult for Canadian sellers to compete on a level playing field.
As stated earlier, I have not yet reached a decision.
I would like to make a correction.
"businesses that are required by law to collect and remit tax."
Actually, GST/HST registered businesses are not required by law to collect taxes. They are only required by law to remit the tax.
It is a very important distinction to make.
When the GST was first introduced, twenty years ago, to replace the old FST or manufacturer sales tax, the plan was to make the tax visible (stupid mistake by the government of the day). Retailers were given the choice to either charge extra or absorb it. Stickers by cash registers were provided by the government to inform consumers on the tax status.
I wish our government would have had the guts to set-up a system similar to Europe and the rest of the world (except the USA) where the GST or VAT (or whatever they call it in each country) is included in the cost of the goods or services. At check-out, consumers pay the sticker price. Period. Let the merchant do the tax bookkeeping.
"businesses that are required by law to collect and remit tax."
Actually, GST/HST registered businesses are not required by law to collect taxes. They are only required by law to remit the tax.
It is a very important distinction to make.
When the GST was first introduced, twenty years ago, to replace the old FST or manufacturer sales tax, the plan was to make the tax visible (stupid mistake by the government of the day). Retailers were given the choice to either charge extra or absorb it. Stickers by cash registers were provided by the government to inform consumers on the tax status.
I wish our government would have had the guts to set-up a system similar to Europe and the rest of the world (except the USA) where the GST or VAT (or whatever they call it in each country) is included in the cost of the goods or services. At check-out, consumers pay the sticker price. Period. Let the merchant do the tax bookkeeping.
I changed my tax system about 1 month ago on eBay for one of the categories of products. Most sells are from Canadians for that category of products. I was absorbing the GST on these because most sells were made to ON (I am based in QC), BC and AB. HST (8%) and TVQ (7.5%) were added to purchases made from QC (practically no sell since the products are in English) or HST provinces. I never had a problem with that but I have to admit that I do not have many sells in these provinces.
I decided to lower my price and charge full taxes with my items mainly because my main competitor in this category is charging taxes. So my price with GST included was higher than is price. My most popular item sells for a little less than 200$. I think that a lot of buyers do not think about taxes in their total cost and only look at the selling price + shipping cost, which are shown by eBay, to make their buying decision.
I went through is feedbacks and he did not receive a bad feedback or comments because he was charging taxes. Up to now, my sells in that category of products is on the rise, compensating for my lower US sells on another brand of products and thus helping me to keep my powerseller status…
I decided to lower my price and charge full taxes with my items mainly because my main competitor in this category is charging taxes. So my price with GST included was higher than is price. My most popular item sells for a little less than 200$. I think that a lot of buyers do not think about taxes in their total cost and only look at the selling price + shipping cost, which are shown by eBay, to make their buying decision.
I went through is feedbacks and he did not receive a bad feedback or comments because he was charging taxes. Up to now, my sells in that category of products is on the rise, compensating for my lower US sells on another brand of products and thus helping me to keep my powerseller status…
"No business can survive long term including taxes in the prices."
Once again, it depends on the business you're in.
Looking at the "real world" Canadian stamp and coin dealers, many (not all) do absorb the tax(es) on retail sales. It is all a reflection of the margins we work with, and the relatively low percentage of sales that is actually taxed, since most sales are exported!
... and we survice very well.
"Brick & mortar stores don't. Why should I? "
Actually, some b&m stores do. Thinking of mattresses! It seems so many of those retailers keep absorbing the tax(es)! Others do it on a promotional basis every few weeks or months (furnitures, appliances, etc...)
It is similar to American retailers accepting Canadian dollar at par in cities along the border. It is good business if your margins can afford it.
Once again, it is not for everybody.
As indicated by godboma, you take your clues from your competitors, for those of us who sell in specific categories.
One of the problems with "collectables" is that sellers are competing with mostly unregistered sellers (many are collectors) who do not charge the tax(es). Often, buyers in those categories do not expect to pay tax and will hit the back button when they see tax added (they do not leave negative feedback or anything like that, they simply do not buy).
Once again, it depends on the business you're in.
Looking at the "real world" Canadian stamp and coin dealers, many (not all) do absorb the tax(es) on retail sales. It is all a reflection of the margins we work with, and the relatively low percentage of sales that is actually taxed, since most sales are exported!
... and we survice very well.
"Brick & mortar stores don't. Why should I? "
Actually, some b&m stores do. Thinking of mattresses! It seems so many of those retailers keep absorbing the tax(es)! Others do it on a promotional basis every few weeks or months (furnitures, appliances, etc...)
It is similar to American retailers accepting Canadian dollar at par in cities along the border. It is good business if your margins can afford it.
Once again, it is not for everybody.
As indicated by godboma, you take your clues from your competitors, for those of us who sell in specific categories.
One of the problems with "collectables" is that sellers are competing with mostly unregistered sellers (many are collectors) who do not charge the tax(es). Often, buyers in those categories do not expect to pay tax and will hit the back button when they see tax added (they do not leave negative feedback or anything like that, they simply do not buy).
I have never and I will never absorb the tax or sell on a tax included basis.
I am opposed to consumption taxes on principle and I will not assist in hiding them.
In 10 years I've only had one buyer complain, they went into an unbelievable tizzy over the GST concluding with all sorts or threats.
Oh yeah, value of the transaction $4, tax charged 28 cents (the old 7% rate).
They got a non-payment strike and a neg and went NARU shortly thereafter.
I am opposed to consumption taxes on principle and I will not assist in hiding them.
In 10 years I've only had one buyer complain, they went into an unbelievable tizzy over the GST concluding with all sorts or threats.
Oh yeah, value of the transaction $4, tax charged 28 cents (the old 7% rate).
They got a non-payment strike and a neg and went NARU shortly thereafter.
" I don't want to confuse non-Canadian buyers nor give them something to bargain with...less said is best said"
Very valid point.
It eliminates the risks of perception by some international buyers that the selling price includes local taxes not applicable to them and asking for a rebate.
No solution is perfect. I do not mention "tax" in most of my listings where I absorb the tax(es). The shipping tab reads "Canadian Residents please note: NO GST/PST (I absorb both if applicable)."
On the other hand, for the few listings requiring tax be added, the message is found in the description in fairness to buyers and to avoid misunderstanding:
"Please note: GST (or HST) MUST BE ADDED for shipment to a Canadian address. "
Very valid point.
It eliminates the risks of perception by some international buyers that the selling price includes local taxes not applicable to them and asking for a rebate.
No solution is perfect. I do not mention "tax" in most of my listings where I absorb the tax(es). The shipping tab reads "Canadian Residents please note: NO GST/PST (I absorb both if applicable)."
On the other hand, for the few listings requiring tax be added, the message is found in the description in fairness to buyers and to avoid misunderstanding:
"Please note: GST (or HST) MUST BE ADDED for shipment to a Canadian address. "
