How I run my business selling software to Americans
I first realized I had overpaid when I received my articles of incorporation from the law firm. Was it because they were in a leather bound binder? Was it because it had been shipped overnight from Toronto to Waterloo, a distance of 83 km, such a distance that I could have driven there and picked it up and then returned and paid less than the cost of shipping it? Instead I had to wait two business days for the Fedex truck to drive back to Cambridge since I wasn't home, and then I had to call in to arrange to pick it up at a "conveniently located" Fedex office a week later.
No, I was miffed because I had paid $1500 to incorporate, when I could have done over the web for far less. Still, it is a very nice binder.
Since that time I have slowly been finding ways to optimize my business, which consists of selling software to Americans. I sell it all kinds of ways.
A typical month:
|WebSequencediagrams Server Sales||$1600|
|Rhymebrain.com Adsense Revenue||$1700|
|Zwibbler.com licensing and consulting||$2000|
I do not want 1 to 3% of my revenue disappearing off the top, so I use XE. When I signed up, I registered my US account and the Canadian one with them by copying the numbers off some cheques, and now I can initiate a transfer in seconds.
Charging taxI added this section due to the comments. As a Canadian, if you make more than $30,000 in revenue in a year or recently (See the CRA web site for specific rules) then you have to register for GST/HST. You may register before that time though, and it may be advantageous, because registered businesses don't pay GST / HST. Keep track of all the stuff you buy for your business, tell the CRA the total each January, and you will get it all back in a nice fat cheque. This works out well when you, for instance, buy a $5000 Macbook pro.
Registering for GST/HST, however, requires you to do certain things.
- Fill out the GST/HST return each year. It is a simple two-page form. Just report your total sales, the tax you collected, and the tax you paid. That's it!
- When you invoice a Canadian customer, then include your HST registration number and the tax charged in the invoice. This varies by province, so make sure you look it up on Wikipedia before you invoice those freeloading Albertans.
Do you charge in US dollars? That's OK too. It may look weird, but you can invoice a Canadian in USD. I do this because all my accounts are set up in USD. Also include HST in USD on the amount, as if it were in CAD. For reporting purposes, I convert the total based on the yearly average USD conversion rate on the CRA web site, but you are free to use other methods.
In January you will have to pay, or receive, the difference in taxes you collected and taxes you paid for stuff.