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Drop Shipment Certificate Exemptions in Canada

Under Canada's Excise Tax Act, drop-shipment rules ensure tax applies to the fair market value of goods that are drop-shipped in Canada and supplied by unregistered non-residents for final consumption in Canada in the same way that tax would apply to goods acquired from the non-resident outside Canada and imported for that purpose. Under general drop shipment rules, parties may be exempt from tax if certain provisions are met.

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Example 2

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If a manufacturer makes a taxable supply of goods to a non-resident, the physical possession of goods is transferred to the customer in Canada and the manufacturer may be responsible for collecting tax.

If a drop-shipment certificate is issued to the manufacturer, the manufacturer is not responsible for collecting tax from the non-resident and the customer is not responsible for self-assessing tax on the goods they received.