September 2, 2020

More than 200,000 people cross the border between Canada and the United States on a daily basis . . . or at least they did. The shutdown of the US-Canadian border has dropped that number by roughly 97 percent.

Among the millions of travelers who are unable to cross for the foreseeable future are the tourists who pour billions of dollars into the economies of both countries. The impact is crippling and has led many small businesses to seek other ways to recoup that lost revenue. One of the most common approaches is to try and translate a portion of those sales from brick and mortar transactions to e-commerce.

This begs the question: As more border businesses try to expand into e-commerce to capture that lost revenue, are there legal obstacles to consider? Absolutely.

For smaller companies, you may not have previously marketed for international sales, and now are venturing into it out of sheer necessity. It is critical to ensure your organization is structured to sell across the border.

A few of the hurdles include:

Tax structure: If you think paying taxes in one country is complicated, try paying them in two countries encompassing potentially multiple states and provinces. With proper planning and guidance from qualified advisors, this can be a very manageable process. Without proper planning, you can end up on the wrong side of two governments.

Currency: The laws and regulations around currency exchanges are vast and complex. Suffice to say, if your company is suddenly going to be shipping product to Canada and being paid via credit card, you’ve got some work to do. Compliance is key, and if a sudden uptick in international sales catches the eye of the IRS (or any number of other regulatory agencies) you want to make sure you are fully compliant.

Shipping: Anyone who has ever crossed the border knows how seriously both countries take it when people try to bring merchandise over. The same is true for shipping merchandise. For example: you might have a storefront in Niagara Falls, New York where you sell chicken wing dip to tourists. You are set up to sell food in New York, but that doesn’t mean you can ship that same dip to Niagara Falls, Ontario. Canada has an extensive list of rules for the shipping of food. This is just one of potentially countless examples where selling in America won’t seamlessly transfer to e-commerce sales.

If you are unsure how to proceed in this new world of COVID-19, we are here to help. Give me a call anytime (716-854-4300) and we can discuss your cross-border challenges. Investing the time and money on the front end to make sure you are in compliance will be well worth it when you are thriving in the new post-COVID economy.

David Alexander focuses his practice on business counseling, corporate law and taxation. He represents Canadian and other foreign corporations in the establishment of United States subsidiaries and in their conduct of business in the United States. He also represents Canadian and other foreign persons who purchase assets in the United States to effect asset preservation. He can be reached at 716.854.4300 ext. 216 or [email protected]