Cross-border bookkeeping for US sellers shipping into Canada: GST/HST, customs and currency entries

What to take away

Selling north: what changes when the customer is in Canada

A US business selling to Canadian buyers adds a second tax system to its books. Two tax authorities now have an interest in the same sale. CRA rules for GST/HST sit alongside IRS rules; they do not replace them.

The first change is tax on the sale. Canadian GST/HST may apply depending on the buyer, the goods and where the goods are delivered. The second change is currency. Canadian customers pay in Canadian dollars, and most US sellers bank in US dollars. The third change is reporting, because the Canadian sales need lines that a US accountant can find quickly.

Most US sellers start as exporters: the customer is in Canada, the seller is in the United States, and the goods cross the border. That model keeps the bookkeeping simple until volume grows. Once Canadian sales are regular and large enough, registration and filing duties follow.

Canada's tax is not one tax. GST is federal. HST combines the federal and provincial portions in participating provinces. Quebec charges QST, British Columbia, Saskatchewan and Manitoba run their own provincial sales taxes, and each has its own registration rules. Check the province-level rule for each province where your buyers sit.

A US seller that stores inventory in a Canadian warehouse may create a Canadian presence and change the registration analysis. Keep the fulfillment agreement with the tax file.

GST/HST registration: the threshold and when a US seller must register

GST/HST is charged under Part IX of the Excise Tax Act. The small supplier threshold is CAD 30,000 in taxable supplies made in Canada over four consecutive calendar quarters. A seller that crosses it generally has to register with the CRA and charge tax from the date registration takes effect.

The threshold counts taxable supplies made in Canada, not worldwide revenue. A US business with large US sales and small Canadian sales can still be a small supplier. Review the test every quarter, not every January, because the window moves.

Non-residents selling digital services or goods to Canadian consumers can face a different test. The CRA's guidance for non-resident digital and remote sellers sets out those rules, so check it before relying on the CAD 30,000 figure alone.

Registering voluntarily lets a business claim input tax credits sooner. Registration gives a business number, which the CRA business account uses for GST/HST, payroll and corporate income tax. Filing frequency depends on annual taxable supplies, and small registrants often file annually or quarterly.

Zero-rated supplies, such as many exports of goods from Canada, still get reported. They carry no tax charged, but they count in the returns. Do not leave them out of the sales ledger.

Two filing methods exist: the regular method and the Quick Method. The Quick Method uses a lower rate on gross revenue and does not allow separate credits for most purchases. Compare the two outcomes before choosing.

If you sell through a Canadian marketplace, the platform may collect and remit tax for you. That does not always remove your own registration duty. Read the platform agreement and keep the settlement reports.

Currency conversion entries and the exchange rate policy

Currency conversion entries translate Canadian dollar transactions into the US dollar books. Every entry needs a rate, a date and a source.

Pick one policy and write it down. Common choices are the daily spot rate, a monthly average rate or the rate on the transaction date. The choice matters less than applying it the same way every month. For revenue, use the rate on the date control transfers, usually the invoice or shipment date. For cash movements, use the date the money moves.

A simple sale looks like this. Invoice CAD 1,000 on a day when the rate is 0.74. Debit accounts receivable USD 740 and credit revenue USD 740. When the customer pays and the rate has moved to 0.73, the bank deposit is USD 730. The USD 10 difference is an exchange loss. Post it to an exchange gain or loss account, not to revenue.

Open Canadian balances at period end should be revalued at the closing rate, with the difference posted and reversed when the item settles. Keep the rate source with the entry, such as a bank export or a published rate table. Keep that trail with the ledger.

Do not mix exchange differences into the tax lines. GST/HST collected is a liability in Canadian dollars. Translate it at a consistent rate and keep the difference in the exchange account.

Reporting lines for Canadian customers and suppliers

Use a Canadian sales account and a Canadian purchases account, or subaccounts under the main ones. On the income statement, Canadian sales sit in revenue. Splitting them out shows the share of revenue exposed to Canadian tax and currency risk, and it makes the threshold test easy to run.

On the balance sheet, GST/HST collected is a current liability. GST/HST paid on Canadian purchases is a receivable until it is claimed. Both sit apart from US sales tax accounts.

For suppliers, a Canadian vendor invoice may include GST/HST. Record the expense net of tax and put the tax in the receivable account. If the vendor is not registered, no tax appears and the full amount is an expense.

Payments to Canadian contractors in construction and similar work may fall under the CRA's contractor reporting rules, which use the T5018 slip. Check whether the payments fall inside them before the year closes.

Reconcile the Canadian tax accounts every month. The liability should equal tax charged on Canadian sales, less tax paid on Canadian purchases and any remittances. A bank reconciliation that includes the Canadian bank or platform account closes the loop.

Input tax credits and how they appear in the books

Input tax credits (ITCs) recover GST/HST paid on business purchases. A registered seller claims them against GST/HST collected, so the net remittance is lower. To claim an ITC, the purchase must be for the business, the GST/HST must have been paid, and you need a valid invoice showing the supplier's GST/HST number and the tax charged.

In the books, the credit sits in the same receivable account as the tax paid. When the return is filed, the receivable is offset against the liability, and the net amount is what you remit. Some purchases recover only part of the tax, such as meals and entertainment, so note the restriction in the account.

Claim within the time limit. For most registrants, an ITC claim is due by the filing deadline of the last return that ends within four years after the end of the reporting period in which the credit first became claimable. Businesses above the CAD 6 million threshold amount, and listed financial institutions, have a shorter two-year limit. Check the CRA input tax credit page for your own case.

Reconcile the credit account to the filed returns. Each return shows tax collected, tax paid and the net. The ledger should agree, or the difference should be explained.

If you use the Quick Method, most purchase credits are not claimed separately. That is the trade-off for the lower remittance rate, so model both methods before filing.

Customs, duty and permits a US seller may still need

Tax registration and trade permits are different questions. A US seller may need no Canadian tax registration and still face customs work.

Goods entering Canada are cleared by the CBSA. Duty is a customs charge set by the goods' tariff classification and origin. GST/HST is a consumption tax. Both can appear on the same import, and both need their own ledger lines. Keep the customs entries, the duty paid and the tax paid in the file.

Some products need a permit from the agency that regulates them, not from the tax authority. For example, food and plants fall under the Canadian Food Inspection Agency, and medical devices need Health Canada authorization. Check the requirement for each product before it ships.

Customs declarations travel with the shipment. A commercial invoice, the tariff classification and the country of origin statement are the usual documents. Errors there cause delays and extra duty. Origin claims under the USMCA (CUSMA in Canada) depend on the goods meeting its rules, so confirm the origin before claiming a preferential rate.

On the US side, exports of certain goods and technologies are controlled under the Export Administration Regulations, administered by the Bureau of Industry and Security. Most consumer goods need no license, but restricted items do. Check before shipping.

A monthly checklist for cross-border bookkeeping

Run these steps each month before you close the period.

If a step fails, fix it before closing. A missed threshold test or a stale exchange rate is easier to correct in the current month than at year end.

Common questions