The Province of Quebec announced today that it intends to expand its requirements for non-resident vendors to collect and remit Quebec Sales Tax (“QST”) on sales to Quebec consumers, effective as early as January 1, 2019. In this context “non-resident” will generally include both non-residents of Canada and Canadian businesses outside Quebec that do not have a significant presence in the province.
It will be interesting to see whether the proposal triggers the same types of legal challenges that are common in the United States where states have attempted to force out of state sellers to register and collect state sales taxes. In a Canadian context, the issue will be whether the government of Quebec has the authority under the Constitution Act, 1867 to impose requirements on non-resident businesses who do not carry on business in the Province. The second issue is whether an assessment for failure to collect the tax can be enforced against a non-Quebec seller.
Under the proposal, businesses that are not resident in Canada who make supplies of intangible personal property (or more precisely, incorporeal moveable property) and services in Quebec to specified Quebec consumers will be required to register using a simplified registration process and begin collecting QST no later than January 1, 2019.
Businesses that are resident in Canada will have until September 1, 2019 to comply. Unlike the rule for non-residents of Canada, Canadian businesses outside Quebec must also register for QST purposes if they supply goods for delivery in Quebec to specified Quebec consumers.
In both cases, the threshold for registration is set at CAD $30,000 based on the seller’s sales to Quebec consumers.
The proposal provides for a specified registration system which is to be available on-line using a simplified application form without security but also without a right to claim input tax refunds for any QST paid. Certain suppliers will have the right to register under the ‘regular’ registration program.
Certain digital platform sellers will be required to collect QST on sales made by others through the platform. Here, the CAD $30,000 threshold will be measured based on sales made through the digital platform.
Amendments to the QST legislation were not included in the announcement. We expect that more detailed information will become available soon.