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For many Canadians, shopping across the border comes with a big shopping bag of benefits, like wider product selection and lower competitive pricing. But what about those cross-border taxes? For some of us, the hurdle of paying duties and taxes can be a biggie. We find the system confusing and stressful. When that border guard leans down and asks us how long we’ve been gone, and how much we have spent, our hearts sink and our pulses race.
Let us help you.
Taxes on goods being brought into Canada from the U.S. are calculated in a variety of ways. A General Sales Tax (GST) may be assessed on overall purchases. The Provincial Sales Tax (PST) varies by province. A Harmonized Sales Tax (HST), a blend of both, maybe collected where an agreement exists. Their values can be determined by contacting your CBSA office.
Cross border shopping can actually help you pay less in sales tax. Here’s how: sales tax is assessed on purchases regardless of where they are made. Paying more for an item means you will pay more sales tax. If the price of the item in the US converted into Canadian dollars (with duties) is less than the cost in Canada, the tax assessed will be lower on the US purchase will be lower than the Canadian purchase
Let’s imagine for a moment that you wish to purchase a new entertainment center, complete with a flat-screen T.V., a DVR, and an auxiliary speaker system. Your best Canadian prices are in the $1200.00 (CAD) range. A 13% HST adds another $156.00. However, if you shopped for the same package in the U.S., with a general savings of 30-35%, let’s price that same package at $800 (USD); add exchange rate of 1.20, and your sales tax actually drops to $124.80.
Duties, on the other hand, vary by two factors: the category of the purchase and the amount of time that the purchaser spent in the U.S. (for those who crossed the physical border and made purchases in person). Some categories of purchases are actually duty-free (for example, many of the items produced in NAFTA countries); as well as certain types of products. Electronics, toys, antiques and baby clothing are some of the most-popular duty-free items. The chart below can help you identify some of the duty rates, which vary from 0%-35% (with the average being 8.56%).
These categories can make a substantial difference in the monetary value of goods that cross the border, so it’s important to consider both the length of stay and the overall duty-free amounts you’re entitled to receive. The following chart can help you begin to see the differences in the duty rates of some of the most popular choices of items.
To determine the duty/tax rates for specific products, try using the following duty calculator:
Since the amount of duty paid depends on the goods you purchase in the United States, a little research can go a long way. Taking the time to research goods with minimal taxes can save shoppers money in the long-run, especially for those who make frequent trips to the States. Many countries (Mexico, Chile, Costa Rica and the United States) have a free trade agreement with Canada which allows the products to enter duty free (depending on the items).
With many goods, buying items produced in the “Most Favored Nation,” countries can also be a viable shopping option, as many of these goods have lower or no duty charges. If you aren’t sure, you can contact the Border Information Services who will help you determine the rates on your purchase. The following chart can give you an overview of how to identify such products:
And if you are really keen, a complete explanation of the NAFTA rules of origin can be found here.
Let us assure you, the process of making cross border shopping even more profitable is simple: look for deep sales, and take advantage of duty-free or reduced-duty options. Planning trips or excursions around your intended purchase can also save you big bucks. For instance, if you want to purchase $500.00 worth of goods, then spending the extra day in the U.S. can extend your duty free allowance when coming back into Canada. By taking time to plan your trip carefully, shoppers can actually decrease the amount of tax and duties paid on their purchases (and enjoy a fun-filled holiday at the same time!).
There is one further money-saving option for shopping across the border, and it may very well be the best option of all. You can save even more money by shopping online from the comfort of your own home. Online shoppers save money by eliminating those travel expenses altogether. You can also save on shipping charges by securing a free U.S. delivery address and then having a delivery company (such as crossborderpickups.ca) forward your parcels to the Canadian pick-up point nearest you. Shoppers can make purchases from a wide variety of stores and take advantage of holiday sales and free shipping offers. When this option is combined with shopping for duty-free items, your savings compound.
If you would like additional information about obtaining a free U.S. shipping address so that you can maximize your savings and have your U.S. purchases delivered to Canada, visit crossborderpickups.ca and learn more about this great money-saving shopping option. We are here to help you shop and save. What could be better?
