Canadian Shopify and Amazon Sellers: Your US Tax Obligations Explained
If you’re a Canadian seller moving products through Amazon or Shopify, you already know how to navigate HST remittances and CRA reporting. But the moment your sales cross the border into the United States, a whole new set of rules kicks in — and ignoring them can get expensive fast.
Do Canadian Sellers Actually Owe US Tax?
The short answer: it depends. The longer answer involves a concept called nexus — the connection between your business and a US state that triggers a tax obligation. Thanks to the 2018 Supreme Court ruling in South Dakota v. Wayfair, most US states can now require out-of-state sellers (including Canadians) to collect and remit sales tax once they hit certain sales thresholds. These are called economic nexus rules, and they vary by state.
So if your Shopify store is shipping $100,000 worth of goods into California or Texas, those states may already consider you obligated to collect their sales tax — even though you’ve never set foot there.
What About Amazon FBA?
Amazon’s Fulfilled by Amazon (FBA) program adds another layer of complexity. When you store inventory in Amazon’s US warehouses, you may be creating physical nexus in those states — sometimes without even realizing it. Amazon operates fulfillment centers across dozens of states, and your inventory may be moving between them automatically. Each state where your inventory sits could be a state where you owe sales tax registration and remittance.
Many Canadian Shopify Amazon sellers discover this situation well after the fact, which is why getting ahead of it matters.
US Federal Income Tax: The Canada-US Tax Treaty
Here’s some relief: the Canada-US Tax Treaty generally protects Canadian sellers from owing US federal income tax, provided you don’t have a permanent establishment in the US. That means if you’re operating your business from Milton, Mississauga, or Brampton without a US office, employees, or fixed place of business south of the border, you’re likely sheltered from IRS federal income tax on your business profits.
However — and this is important — state income taxes are a different story. Not all states follow the treaty, and some may still require you to file a state return depending on your level of activity there.
ITIN, EIN, and US Filing Requirements
Depending on your situation, you may need an Employer Identification Number (EIN) from the IRS to register for sales tax in certain states or to work with US payment processors. If Amazon is withholding a portion of your US earnings, you’ll likely need to file a US return to reclaim that withholding — and that requires the right identification numbers and forms in place.
This is where things get technical quickly, and where the cost of DIY mistakes tends to outweigh the cost of professional advice.
What You Should Do Right Now
If you’re an active Canadian Shopify Amazon seller, start by pulling your sales data by US state for the past 12 months. Compare those figures against each state’s economic nexus thresholds — most sit around $100,000 in sales or 200 transactions per year. Then check whether you’ve used FBA and which states your inventory has touched.
From there, you’ll need to decide which states require registration, whether voluntary disclosure makes sense for past exposure, and how to integrate US sales tax collection into your Shopify or Amazon Seller Central settings going forward.
It sounds like a lot — because it is. But with the right cross-border tax guidance, Canadian sellers in the GTA are managing these obligations efficiently every day.
Get Cross-Border Tax Help from a Canadian CPA
Syed CPA Professional Corporation works with e-commerce sellers across Milton, Mississauga, Brampton, and the broader GTA who are navigating US tax obligations alongside their Canadian CRA responsibilities. Whether you’re just starting to sell into the US or you’ve been doing it for years without proper filings, we can help you get compliant and stay that way.
Call Syed CPA at +1 (647) 977-8977 or visit syedcpa.ca
