Canada is a lucrative market where I have witnessed US companies refusing to fill orders because of the associated ‘hassle’ they’ve encountered when shipping into Canada. The main reason for their desire to avoid shipping to Canada was “the tax issues” and resulting border holdups often exacerbated by extra charges for customers or the online retailer. Here’s how US online merchants can make the most of the Canadian market…
Canada’s Non-Resident Importer Program
For online retailers, the Non-Resident Importer program is the easiest way to manage these issues. Reverse your role and become an importer rather than exporter.
The Canadian Government has always been very open to US companies Doing Business in Canada using the “branch office” before the North American Free Trade Agreement and more recently the “Non-Resident Importer” program.
The program enables US companies to register their business in Canada without paying Canadian tax on the revenue, however, the GST/HST (Canadian consumption tax) is paid. Non-Resident Importers do not pay any income tax to the Canadian Government all income is taxable in the US.
Collection of the tax is the primary reason for border holdups and extra charges. US businesses are not aware that most goods and services sold in or into Canada are subject to taxes. By registering their business the US online retailer can pay the tax and have less border crossing hassles associated with exporting goods to Canada because when they make a sale they are delivering the goods into Canada as a Canadian company, therefore, the tax is not **due** when it crosses the border but at a later date (usually quarterly).
Learn how to register your business as a Non-Resident Importer.
Why Canada Instead of Larger Markets?
The reason most companies are looking to these other regions than Canada is hoping to appeal to larger populations. That can be very enticing, but what are the negatives?
- Major differences in the culture and product expectations
- Language as a huge barrier to entry
- Higher cost of shipping
- Complicated logistics
- Different laws
- Marketing and branding disconnect.
Although Canada has a smaller population, the advantages the Canadian market has over the others is:
- Less differences in culture and product expectations
- Shared language (for the most part)
- US businesses shipping from the east or west coasts could find the cost of shipping to Canada is less than the cost of shipping across the whole US
- Logistics are far less complicated as an importer
- Once the US business is registered in Canada getting into the Canadian Search Engine indexes is as easy as purchasing a Canadian Domain
Doing Business in Canada
Canada has, for the most part, the same laws, culture, and language as the United States partially because of the proximity of much of the Canadian population being influenced by US television, radio, movies and more with the laws in both having origins in British Law.
Ninety percent of Canadians live within 100 miles of the US border. Vox ~ May 5, 2016
Given that a large % of immigration in Canada is into these areas it is quite possible that 90% has grown even bigger! The above statistic is the primary reason that Canada is a far better market than even some parts of the US for US companies looking to expand.
If you look at this from purely a logistics and shipping costs perspective the Canadian market may even have advantages over some parts of the Lower 48 States and definitely Alaska and Hawaii.
Less Complications Ranking in Canadian Search Engines
The chances are that any site that ranks well in the US will do as well or better in Canada. Yahoo! and Bing have Canadian indexes but unlike Google , they don’t require changes to get into the Canadian results.
To get into the Canadian Google index the site must be either a .ca or be hosted in Canada. Once you have a registered business in Canada you can buy a .Ca domain which enables a site in US to be in Canadian index using the US site content (though you might want to consider pricing in Ca. dollars. Competition in both the organic and PPC listings is simpler since there is far less competition.
Logistics, ease of entry, less competition in the ca. index, and registering as a Non-Resident Importer in Canada makes Canada a much better market to break into for US online retailers.