Hello and thank you in advance!

I'm interested in sourcing and selling a private label product in
Canada (manufactured, inventoried & sold exclusively in Canada). 
However, I am a U.S. citizen/distributor.  Please help me to
understand the tax/legal environment that will allow me to source,
warehouse and sell a product in Canada but "distribute" from the U.S.

Here are more details -- 

The product is an energy bar.  The manufacturer is in British
Columbia.  The drop shipping site is in British Columbia.  The buying
market is throughout Canada.  I am not a Canadian resident.  I am a
citizen of the United States, and a resident of California.

Questions that occur to me--

1.  Is there any law to prevent me from entering this business structure?
2.  If not, then what are the product "exportation" issues, including
tariffs or taxation, that I need to understand?  Canada perspective? 
U.S. perspective?
3.  Do I file an income tax statement only in the U.S.?

Many, many thanks! 

Gina

THE FOLLOWING IS FROM PERSONAL EXPERIENCE ONLY AND IS NOT MEANT TO BE
LEGAL OR ACCOUNTING ADVICE. PLEASE CONSULT A CANADIAN LAWYER AND/OR
ACCOUNTANT.

Operating a company in Canada is not much different than operating a
company in the USA EXCEPT for some packaging rules if the products
will be sold in retail locations. Canada is, as far as retail
packaging is concerned, officially a bilingual country (I know this is
going to get a lot of comments, but we're talking legal here not
reality). This means that retail products sold in stores must contain
labels with the same information ibn english and french. There are no
requirements for any other languages. Note that this does not apply to
products sold over the Internet. Situations which may prevent you from
registering a company in BC or Canada should be discussed with a
lawyer.

There are some excellent articles on line. Here are links to a few:

Do Business in Canada!:
http://sbinfocanada.about.com/cs/legalmatters/a/dobizcanada_3.htm

Doing Business in Canada:
http://www.lowtax.net/lowtax/html/offon/canada/can_business.html

Since it sounds as if the product is manufactured ans sold from
British Columbia (BC), you must treat the business as if it is setup
in BC. This means that your business should be "registered" in that
province as either a proprietorship, a partnership or an incorporated
company, and that entity will have to deal with both coporate tax on
profits and sales taxes on sales from that province. Note that every
Canadian business also pays federal corporate taxes and GST (goods and
services) taxes on sales. Some food products are exempt from sales
taxes (both provincial and federal) but I don't believe energy bars
fall in that category.

If this seems a bit overwhelming, let me suggest you speak to a
Canadian lawyer to decide on the type of business registration to
file, and to a Canadian accountant to discuss all the tax
ramifications and how you can easily deal with these.

Business regsitrations in BC will allow you to conduct business in BC
including selling products to other provinces or even exporting to
other countries. Note that another option in Canada is a Canadian
(federal) Incorporation which allows you to operate a business
anywhere in Canada, after also registering in the province. A Canadian
Incorporation is useful if you plan to operate in several provinces
because it means you do not have to incorporate in every province -
you just have to file your name registration in those provinces. A
Canadian lawyer can give you more information on this option.

In Canada, if your business is registered as a proprietorship, income
(and expenses) are accounted for when you file a personal income tax
return with the Canadian Revenue Agency (CRA) - and income taxes are
paid at that time if owing. Losses can be carried forward and offset
income in future years. As a non-resident, you would only have to pay
taxes on earned Canadian income. It is my understanding that Americans
must pay income tax on their worldwide income, although because of tax
treaties you would receive credits for taxes paid in Canada. Sales
taxes are submitted on an annual, semi-annual, quarterly or monthly
basis, depending on the sales volume. Higher sales mean more frequent
filings.

Incorporations are legal entities setup to do business in Canada.
There are a number of websites for incorporating in Canada including
incorporating on-line, however these usually involve simple
incorporations for Canadian residents. You might benefit from talking
to a Canadian lawyer about incorporating a Canadian company as a
non-resident. Incorpoation includes the requirement to make a NUANS
name search to ensure the business name you choose does not conflict
with another company resgitered with that or a similar name.

some links:
NUANS name searches: http://www.nuans.com/

On-line Federal Incorporation:
http://strategis.ic.gc.ca/epic/internet/incd-dgc.nsf/en/h_cs01411e.html

Registering a business in BC: http://www.sb.gov.bc.ca/bizstart-inc.php

Business tax returns must be filed annually and, even if no revenue is
generated, there is often an annual fee that must be paid to continue
doing business as a coporation. Separate returns are filed at both the
provinical and federal levels. Because of the complexity of business
returns it is advisable to use a Canadian accountant to prepare the
returns.

Here are some links relating to incorporation:

GST / HST info for incorporated businesses:
http://www.cra-arc.gc.ca/tax/business/topics/gst/corporation/menu-e.html

BC Sales Tax information:
http://www.rev.gov.bc.ca/ctb/publications/brochures/ec97.htm

Speak to your accountant and or a Canadian accountant about your
personal income tax implications.

Good luck.

Thank you so much, nbguy.  I appreciate your thoughtful comments and
links.  A star in your crown!

BTW, do you know if I need a Canadian business entity (cdn corp or cdn
LLC) if I source the product here in the U.S. but export to British
Columbia?

And do you know if I need to place both english and french on product
wrappers that are marketed to BC only?

I drifted around the Net looking for a Canadian accountant to help me.
 Any chance that you are one?  If so, can I hire you for the
specifics?

In any event, thank you for the good information you have already provided!

Gina

The requirement for bilingual labels in retail stores is a CANADIAN
legislated requirement, so it applies in every province. Whether or
not the legislation is equally enforced in all provinces is another
issue. Without bilingual labels it would be virtually impossible to
sell your product in bigger retail chains, but you might get away with
it in smaller independent stores.

It's my understanding that you can quite easily operate an American
registered business exporting products to Canada without creating a
Canadian company. Many Canadian companies deal with American companies
that do not have Canadian offices or subsidiaries. You might find it
easier to get your product on retail shelves by dealing through a
Canadian wholesaler or distributor. As an exporter without a Canadian
presence you would only have to deal with American taxes.

Incidentally, if you are doing business with Canadians, it's a good
idea to understand how we perceive ourselves different from Americans.
There's a good paper on the subject at:

MANAGING CULTURAL DIFFERENCES: http://diplomacy.shu.edu/leadership/5_4ch10.htm

The CANADAONE (http://www.canadaone.com/) website also has some
excellent articles you might read. One I found talks about importing
from China, but the same rules apply to importing into Canada from any
other country. You can find the article at:

http://www.canadaone.com/ezine/expert/expert_qa.html?id=04Jul19_2

>>Are you an accountant?
No, unfortunately I am not an accountant, but I do appreciate the job
offer. It would be better to deal with an accountant from BC anyway
who is familiar with importing. You can find one through:

The Institute of Chartered Accountants of BC: http://www.ica.bc.ca/kb.php3

I live in NB on the Atlantic Ocean side of Canada. My experience comes
from developing and installing POS and inventory databases for
retailers in Quebec, Ontario, and New Brunswick and as a proprietor
running my own business for 11 years.

Take care.

I'm fortunate to have you drop in on my dilemma.  Your advice is clear
and good.  Thank you!

I appreciate the article you suggested on understanding the
differences between the Canadians and Americans in business.  My
cross-cultural experience is more casual as I visit Canada a few times
a year to relish the Canadian countryside and gracious personality of
its people.  In fact, we just returned from a trip to Quebec,
including Montreal, the Laurentians, Quebec City, Charlevoix (the BEST
apples on the planet) and the Eastern Townships. Our usual trips are
to the western coast, as it is close by and we have cousins there.  It
was a pleasure to experience a new aspect of Canada (and get a chance
to practice our French).  We'd love to see NB and will certainly plan
on a future trip.

The issue underlying my questions here is that we are trying to figure
out how we can move to the Vancouver area (we also have family there)
and make money, but before our residency application is approved. 
We'd keep our home in California, so technically, we'd be
"vacationing" in Canada while we wait.  However, it behooves us to
figure out how to legally make money while we are staying up there. 
Who knows how long the application will take?  We just submitted it.

Regarding Canadian distributors, we'd love to secure those
relationships, but I can't imagine why a distributor would go with a
smaller label when they can merchandise Power Bar, Balance Bar and
Clif Bar and its offshoots.  We are thinking that we'll need to make
our case retailer by retailer.  How terrific it would be to have
agents represent us there, certainly ideal, but probably snack food in
the sky..

nbguy -- you exemplify our experience of Canadians.  Helpful,
knowledgeable and generous.  Thank you.  We plan to give a lot back to
our future community as well.

All the best to you.

Gina