Commercial v. Personal: or how to declare your importation

Posted by Cory

A common problem at Customs is the frequently ambiguous question of whether an importation should be considered ‘commercial’ or ‘casual’ (i.e. personal) for administrative purposes. The procedures differ for each, and since your input will affect the outcome, we have published this guide so you can better understand the end use to declare.

 

Is your importation commercial or personal? Please find our answers here

Why does it matter that importations are ‘business’ or ‘personal’?

Commercial importers are subject to less tax (only the federal GST is collected on the value of the goods regardless of the importer’s province). They are also subject to record-keeping requirements (all receipts should be kept for six years) which is the primary enforcement tactic for the modern CBSA.

Personal importers are required to pay all applicable federal and provincial sales taxes on their purchase when it arrives in Canada. They are also more likely to experience an examination of their goods since they will not be registered in the Customs database as an importer of record.

Why does Customs think my shipment is commercial?

Four factors will trigger expectations from the CBSA that your shipment is commercial in nature

  1. Quantity: importing a large quantity of the same item? Unless you are stocking up for a disaster, Customs will assume you are re-selling, or using the item for an occupational reason
  2. Type of item: importations of machines or industrial scale products will likely trigger a request from Customs for a commercial entry.
  3. Cost: a very expensive item, unless on a product such as art or clothing, will likely draw the attention of Customs for being of a business nature.
  4. End use: even items typically used in a domestic nature, such as televisions or computers, are considered commercial if the ultimate user of the product will be a business or a professional.

I am working under the table, will clearing commercially expose me to federal auditors?

As clearing an order commercially is quicker, simpler and cheaper–fear of exposure seems to be the only reason to declare personal use. That said, I do not know of any CRA strategy to target unreported revenue at the border.

I would also like to add that the Canadian government likes to encourages new business, and that the fear of Draconian regulation is overblown. So, if you are selling parts out of your garage, good for you! So long as your sales are under $30k and you are reporting any additional income to your accountant, you have nothing to fear at the border or in Ottawa.

I will use my importation for personal and for business, what should I do?

Anything for “commercial, industrial, occupational or like use” should be declared as a commercial importation. Even if you do use the machine for some personal uses, if the essence of the machine is intended for your business it should be done on a commercial entry.

I imported a machine for my business but will use it personally instead. What do I do?

This is called a ‘diversion’  in tax-talk. The easiest thing would be to sell the machine from your business to yourself at a fair value so that all the paperwork is prepared for your accountant, and the correct amount of tax is collected.

I am importing a sample set of items I may sell in the future, but not sure if I will follow through. Should I clear as a business?

If the cost and quantity of the item is low enough, you will likely be able to release the shipment from Customs as personal. If not, obtaining an importer number would be wisest and will save you trouble down the road.

I am not required to register for sales tax, why do I need to register for a business number to import something?

To be clear, an importer number (while numerically the same as a GST #) is not the same as registering for GST. The ‘importer number’ keeps your address and information in the Customs database should they have questions down the road regarding your import activity. While you may not wish to obtain a business number, Customs does have the right to prevent the delivery of your goods until one is obtained.

I received a letter about GST registration after importing, what do I do with this?

This is a courtesy letter sent out by the CRA to assist new businesses with their GST registration. If you do not plan on registering because you are under the sales threshold of $30,000, you can simply ignore the letter. Your import/business number will deactivate after two years of inactivity.

In sum, importers need not be afraid of importing their goods commercially, even if the ultimate use of the product imported is unclear, you will likely save a lot of headaches down the road. In special cases, such as private collections, explaining in detail your personal use of the product should be enough to obtain a release without adding unneeded information to the CBSA database.

Still unsure if your import is commercial or casual? Ask us