I received this question from a customer today after they received my invoice for annual support and updates for AgLeader SMS Basic which includes access to the Agfiniti cloud platform for the upcoming year and I thought I would answer as an open letter to any of my Canadian customers who have wondered the same thing.
“Why are you charging me HST on a U.S. based annual fee…..I would rather pay $225.00 U.S. like I would if I subscribed to the service from one of my fellow U.S. based consultants”
Here is what my invoices look like. As a courtesy, I do list the US retail price because if you choose to purchase from a US AgLeader dealer as this question suggests or directly from AgLeader in Iowa that is the retail price you would pay in US dollars. I then convert to CDN using the exchange rate on date of invoicing which appears to have been 1.36 (Jan 2020) and add HST on the total amount in CDN dollars as required by the Canada Revenue Agency.
Here is how this works:
As an AgLeader SMS Dealer I purchase the support package for a wholesale price (in $US) and sell it to you for the ($CDN) retail price. The margin between those two prices is what I get to keep to run my business and pay for the time I am offering to support you throughout the next year. It also compensates me for the time I spend every week improving my SMS and Agfiniti skills as well as other industry programs so that when you do contact me, I am knowledgeable about a range of issues, brands and the agri-business climate in Canada. The margin goes towards answering your texts, email questions, phone calls to troubleshoot mapping questions, preparing step by step instructions or whatever you need for successful use of the program. I do not get paid anything from AgLeader to be a dealer. My only source of revenue as a dealer is that margin between what I buy from them and what I sell to you.
According to Canadian Tax laws I must remit to the CRA the HST on the total retail amount of Goods and Services that I bill out. Even if I were to accept payment in US Funds, I still have to remit based on the CDN amount. Since this subscription is really more of a service, it is not as if a physical item gets imported across the border. If it was an actual physical product that I imported, I would have paid HST on the wholesale rate, billed HST on the retail rate and remitted to CRA the net difference. Either way CRA gets the full amount of HST.
On my customer’s side of this business transaction they would be able to deduct this amount of HST that they paid me from the total amount they owe the CRA as part of running their business for the year. My customers are either farm businesses, agronomy retail or consulting businesses.
If customers feel they are better served by buying out of the US and avoiding the HST they are forgetting that on their annual HST remittance there is a line that expects them to self assess purchases that they made to run their business that they did not pay HST on at point of purchase, like buying across the border. If they never get audited maybe they can slide by on that one, but as someone who has had the exercise of an audit, CRA will find the discrepancy whether the error was made accidentally or intentionally and CRA will get it’s due after the fact even if it is a paltry amount like $39.78.
I get that none of us wants to pay taxes. Just watch the news and anyone can think “And my tax dollars paid for THAT?” But we all understand that tax dollars are what makes our civic world go around. The good stuff like a fairly enviable health care system is funded the same way as the things that one might not agree with.
Back to my customer’s question:
If you would rather buy direct from a US source, by all means you are free to do so. Call AgLeader at 515-735-7000 and they will accept your credit card over the phone and get your subscription renewed right away. You will be able to call or email their support line for the upcoming year, just like you have been able to in the past. If you choose this route, you will be telling me that you do not require my additional support and that you will not be calling me when questions arise. If you do decide to buy direct from them and still wish to call me I will simply bill you for my time at my standard non-subscriber’s rate of $100 CDN per hour. Plus HST.