self employment in Montreal Quebec Canada - works in Vermont


Hi.  I am a US citizen and recently received my canadian PR status and moved to Montreal.  My place of employment is in Vermont and I drive to the states once a week for a couple of days to work.  I want to start a home based business doing crafts (I previously have experience in jewelry making), but I am a little lost on the process now that I am living in Canada.  I want to be able to sell my work in Vermont while I am there, and also sell it in Montreal where I now live.  I also will have a web page and who knows where my clients will buy from.  Who will I owe taxes to and how will I report my income?  Since I already have a regular job in the states, should I try to base this business out of the states as well?  Since the crafts are "assembled" at my residence in Canada, even if I buy the raw materials from the US and sell the finished products in the US, I am unsure of the legality of it all.  Any help would be appreciated.  Thanks!!!!!!!!

david ingram replies

As a Canadian Resident, you first obligation on your 'world wide' income is to Canada under Article IV of the US / CANADA Income Tax Treaty.

As a US citizen, you are also required to report your world wide income.

Both countries have the right to tax source income first. 

'source' does not mean where the money was paid from.  It means where the money was earned.

SO!!!!  If you are physically working in Vermont 3 days a week and telecommuting from Montreal 2 days a week, Vermont and the US feds get first dibs at the 60% and Quebec and Canad get first dibs at the 40% earned in Canada.  You have picked about the most complicated employee tax return you can do in North America because you have foreign tax credits going back and forth.

Throw in the self employment and you are an accountant's retirement plan (just joking).

If you are producing your crafts in Quebec and exporting them and doing over $30,000 a year gross (before any expenses) you will also need to register for a GST number.

The rest goes past the limits of this free Q & A.  You need to deal importing materials and exporting a finished profuct as well.

If you are selling on eBay and mailing from Canada, you will have one set of rules.

If you are going to drive across the border and mail from the US (cheaper and easier) you will likely want to export your product in multiples.

While it is getting started, you might want to make it, wrap it, address it, and take it across the border to mail.  DON'T SEAL THE PACKAGE because the US border people might want to see what is in the package.

PLUS, you are now an importer/exporter from and to the US. You need to go inside at the US side and buy a $100.00 a year licence or spend $5.00 each time you export something from the US and $5.00 each time you take something in.

I am also assuming you will need to pay Canadian duty bringing the raw items in to Canada because it will be too small to set up something like a bonded warehouse.  You might find it easier to pay a little more and source from Canada.

You also might want to talk to a Commercial Border Brokerage Firm.  At this stage, you are too small to get someone really interested but  You will get information and if you do use them a couple of times, you can likely copy the method and do it yourself afterwards.
Allied Custom Brokers in Montreal is one possibility - they have 509 employees - 'somone' might have a few minutes for you.

R& W Customs Brokers only have 8 employees and might be easier to deal with

There are a dozen others of course.