Canadian goods, global tax headaches

4 November 2026

1. Market context

Market size

The global cross-border B2C e-commerce market was valued at approximately US$1.8 trillion in 2025 and is forecast to grow at a compound annual rate of 20.6% to 2034, which would see it roughly double by 2029.¹ Asia Pacific is the largest region at 30% of the market. Published estimates for 2025 range from about US$1.1 trillion to US$1.9 trillion, so any single figure should be treated as indicative.

For Canadian manufacturers, the relevant point is that webstores and global marketplaces now allow even smaller producers to reach overseas consumers directly without local distributors.

Key export markets

Canada exported C$720.8 billion of domestic goods in 2025. The US remained the dominant destination at C$517.3 billion (71.8%), followed by the UK at C$45.7 billion (6.3%), China at C$34.4 billion (4.8%) and Japan at C$14.4 billion (2.0%), with the Netherlands, Mexico, Germany, South Korea, France and India completing the top ten.² The remaining 28%, around C$203 billion, went to markets that charge VAT, GST or an equivalent consumption tax on consumer sales, typically from the first sale for non-resident sellers. US tariffs introduced in March 2025 are accelerating diversification towards these markets: the number of Canadian enterprises exporting to the US fell by 542 in 2025, mainly SMEs, with manufacturing among the hardest-hit sectors.³

2. Regulatory changes over the past 12 months

The most significant development for Canadian manufacturers selling to consumers is that low-value parcels to the EU now attract customs duty. The €150 duty exemption ended on 1 July 2026 and a €2 per-item handling fee follows in November 2026. The UK, US and New Zealand are moving in the same direction.

Key dated changes

VAT and GST rate changes

Most manufactured goods are standard-rated, so standard-rate movements have the greatest impact. Romania increased its standard rate from 19% to 21% on 1 August 2025.¹⁰ Reduced-rate changes in Finland, Lithuania, Austria, Latvia and Slovakia during 2026 affect food and selected goods, while Switzerland’s planned VAT increase has been deferred to 2028.

GST and low-value goods regimes

Australia, New Zealand, Norway and Switzerland retain seller registration for low-value goods once turnover thresholds are met. The principal development this year is the introduction of per-parcel border charges, such as New Zealand’s levy, rather than changes to the underlying GST rules.

US sales tax

Around 28 states now apply a sales-only economic nexus test, while around 15 states plus Puerto Rico and Washington, D.C. retain a transaction count.¹¹ Alaska and Utah removed the 200-transaction test in 2025 and Illinois followed in 2026.⁸ Marketplace facilitator rules are unchanged in principle, although states differ on whether marketplace sales count towards a seller’s own threshold.

Enforcement trends

Tax authorities now receive seller data directly from marketplaces and payment service providers through EU DAC7 platform reporting and CESOP payment data. EU and UK customs reforms also shift duty liability from consumers to sellers and platforms. As a result, unregistered sellers are more readily identified and audits increasingly originate from third-party data.

3. Key issues in selling to overseas consumers

A Canadian manufacturer selling direct to overseas consumers generally owes tax in the consumer’s country, often from the first sale. Five issues account for most of the exposure: destination taxation with little or no threshold, the EU import model, local fulfilment, US economic nexus and returns.

Registration triggers

Non-resident sellers benefit from little or no threshold and each regime has its own returns, deadlines and record-keeping requirements.

EU import model: IOSS or delivery duty unpaid

For EU consignments up to €150, the choice is between collecting VAT at checkout and leaving the consumer to pay on delivery.

Higher-value products, which are common for manufacturers, fall outside IOSS altogether. These require either the consumer to act as importer or the seller to act as importer of record with a local VAT registration.

Local fulfilment

Holding stock in an EU, UK or US warehouse removes the low-value parcel issue but triggers local registration. Non-established sellers do not benefit from the EU €10,000 distance-selling threshold, so OSS is required from the first cross-border sale out of EU stock. Moving stock between EU countries creates further registrations and intra-EU reporting obligations.

Marketplace responsibilities

Marketplaces act as deemed supplier for EU imports up to €150, for EU sales by non-EU sellers from EU stock, for UK sales by overseas sellers and for Australian, New Zealand and Norwegian low-value sales. They do not cover the seller’s own webstore or the import of stock into a fulfilment warehouse. Platforms also report seller data to tax authorities, so any gaps are visible.

US economic nexus

Direct-to-consumer sales into the US typically cross economic nexus thresholds quickly across many states, most at US$100,000. The webstore must calculate tax at the destination address, including local rates and apply product taxability rules that vary by state. Home-rule jurisdictions, such as Colorado and Louisiana localities, add separate registrations and filings.

Rate and classification complexity

The same product can be standard-rated in one country and reduced-rated or exempt in another, while customs duty now depends on an accurate HS code for each item. Manufacturers selling parts, kits and bundles face the greatest classification risk.

Returns and refunds

High return rates in direct-to-consumer channels generate credit note adjustments across many jurisdictions. Recovering import VAT and duty on returned goods is often difficult and the EU €2 handling fee is not refunded. Goods returned to Canada bring CBSA processes and CARM into scope. Without a defined process, the business can overpay tax on sales that have been reversed.

Historic exposure

Many manufacturers began selling online before reviewing their obligations. Past unregistered sales carry back tax, penalties and interest. Voluntary disclosure programmes in many countries and US states can reduce or waive penalties where the business comes forward before the authority makes contact.

4. Implications for the CFO and finance team

For a CFO, overseas indirect tax is a margin, cash and governance matter as much as a compliance one. Tax that was never collected from the customer comes out of profit, with penalties and interest on top.

Financial risk

• Back taxes: VAT, GST or sales tax not charged at checkout remains payable and usually cannot be recovered from past customers.
• Penalties and interest: These accrue per period and per jurisdiction, so exposure grows with every month of unregistered sales.
• Margin pressure: The EU €3 duty and €2 handling fee per item, together with US duties, add fixed costs that weigh most heavily on low-value baskets. Prices set before July 2026 may no longer cover landed cost.

Cash flow

• Payment timing: Monthly or quarterly payments in multiple currencies, often due before marketplace payouts arrive.
• Reclaim delays: Import VAT on stock moved into EU or UK warehouses can take months to recover, particularly for non-resident claims.
• Representatives and guarantees: Some countries require a fiscal representative or bank guarantee from non-resident businesses. IOSS also requires an EU intermediary for Canadian sellers.

Resource strain

A manufacturer selling to consumers in the EU, UK, Australia and 20 US states can face well over 100 filings a year, each with local-language portals, authority correspondence and different deadlines. Most Canadian finance teams are not resourced for this volume.

Systems and data

• Transaction data quality: Ship-to country, consignment value, HS code and origin must be captured for every order.
• Tax calculation accuracy: The webstore and ERP must apply destination rates, US local rates and product taxability correctly.
• Reconciliation: Webstore data, marketplace reports, carrier duty invoices and tax returns must agree, including credit notes for returns.

Governance

• Board reporting: Indirect tax exposure should sit on the risk register with a named owner.
• Audit committee oversight: Uncertain tax positions may require provisioning and disclosure.
• Tax control framework: Documented controls over thresholds, rates and filings reduce audit risk.
• Due diligence: Unregistered overseas sales surface in funding rounds and M&A, frequently leading to price reductions, escrows or indemnities.

Strategic decisions

• Market entry cost: Registration, representation and filing costs should form part of the business case for each new market.
• Pricing: Decide market by market between tax-inclusive local pricing and adding tax at checkout.
• Fulfilment model: Shipping from Canada, using IOSS or holding local stock each produce a different tax footprint.
• Build versus outsource: Compare the cost of in-house specialists and software with that of an outsourced compliance provider.

5. Checklist: five key considerations

These steps should be addressed in sequence, as each informs the next.

1. Establish your footprint. Map consumer sales by country, US state and channel (webstore and marketplace) against registration thresholds, including where stock is held and the value bands of your parcels (under €150, under £135 and above).
2. Confirm your registrations. Review existing VAT, GST, US sales tax, OSS and IOSS registrations and close any gaps. Confirm that your IOSS intermediary and customs broker are prepared for the €3 duty and €2 handling fee.
3. Assess historic exposure. Identify past unregistered sales and decide on voluntary disclosure before an authority makes contact.
4. Review systems and data. Ensure transaction data, HS codes, origin and tax calculation are sufficiently accurate to support correct returns, including credit notes for returns.
5. Determine resourcing. Assign clear internal ownership and evaluate in-house capacity against outsourced support.

6. Working with Tax Desk: CFO FAQs

Dates and thresholds in this briefing were checked on 30 October 2026. This briefing is general information and does not constitute tax or legal advice. Rules, rates and thresholds change frequently and the position for your business should be confirmed before acting.