I understand how taxes work within Canada, but when I am dealing with US customers, what taxes apply and do I need to collect taxes to give to the US gov, Candian gov or both? Do I need to register with the US to collect taxes there? How does the income I'm getting from the US (in US dollars) factor in to my Canadian income taxes? According to Canadian laws, I don't need to collect taxes on my services within Canada unless I make over a certain amount in revenue (40K I think). Does income from the US count towards that revenue? I don't want to get in trouble with the CRA or IRS, but everyone I ask gives me a different answer about how this works.

I will answer this is the simplest form I can. Basically in every country to conduct business in you will need to pay taxes in that country. If you have an office, employees or your revenue comes from that country you have to pay taxes. These taxes will include State, Federal and Sales Tax. Moreover, this at the beginning will make you think you are paying double tax since this income also has to be paid with your local government, but it isn't so bad. This could be a great opportunity to build a tax strategy where you can take advantage of multi country taxation which can lower your overall tax bracket. There are several steps you have to do to conduct business in the US, such as incorporating first as a foreign corporation in the state you chose (Preferably one with no state tax) then filing your taxes. Your tax preparer in Canada will have to take this in consideration since there are forms he has to fill out to cancel either you Canadian Income Tax or your US tax preparer to fill out the return not to pay taxes here but in Canada... whichever tax you have to pay depending on the international treaties they have.

Answered 7 years ago

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