Canadian businesses that carry people or goods to the United States are subject to various tax obligations.

Carriers are subject to both U.S. federal and state tax rules. Note that tax obligations vary greatly from state to state, and in some states, simply transiting through a state may trigger a state tax obligation.

Federal requirements

Under the Canada-U.S. tax treaty, a Canadian carrier is not subject to U.S. federal tax provided it does not have a permanent establishment in the U.S. and is only involved in international transportation (Canada to the U.S. and U.S. to Canada).

However, the carrier must file the required form to invoke the tax treaty and a non-resident tax return with the U.S. tax authorities. These documents must be submitted within five and a half months of the fiscal year-end. In the absence of this return, the Canadian carrier would be taxable at the U.S. federal level.

Generally, carriers must also file an information return with the federal government and pay the annual highway use tax. This tax is based on the number and weight of heavy vehicles on U.S. highways. The required return covers the period from July 1st to June 30th. The return and payment must be submitted by August 31st of the year to which they apply.

Each state has its own rules

To be subject to U.S. state taxes, a business must have a sufficient presence or Nexus in a state. For example, having an office or inventory on consignment in a state will generally trigger Nexus.

Each state has its own definition of Nexus. For a Canadian carrier, Nexus could be triggered by one or more of the following criteria:

  • Annual total number of pick-ups and deliveries in a state;
  • Annual total number of trips in the state;
  • Annual total kilometrage travelled in a state.

Several states are party to the Canada-U.S. tax treaty. In these states, a Canadian carrier does not have to pay state income tax (if it does not maintain a permanent establishment there). On the other hand, it could be subject to another form of taxation, such as a minimum tax based on sales or a capital tax.

It should be noted that major states such as New York, Pennsylvania and California are not party to the tax treaty.

The company must file an annual tax return in each state where it has Nexus (whether or not the state is party to the tax treaty), within three and a half months of the fiscal year-end (two and a half months if the year-end is June 30th).

To determine its state tax obligations, a Quebec carrier usually relies on its internal pick-up and delivery reports, as well as on its quarterly fuel tax returns submitted to the Quebec government. These returns determine the kilometrage travelled in each territory: Canadian provinces/territories and U.S. states.

U.S. taxation is complex, and there are several tax implications that must be considered in the case of cross-border transportation activities with that country. Do you have questions or need advice? Contact our international tax experts.

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Whether you are an employee, a self-employed individual or a professional, you are required to keep a record of your expenses when using an automobile during the course of your professional activities. To assist you, we have developed l’Auto-route to help you record the necessary information.

Whether you are an employee, a self-employed individual or a professional, you are required to keep a record of your expenses when using an automobile during the course of your professional activities. While this may be a tedious and unpleasant activity, it is essential.

We invite you to download l’Auto-route. This Excel file will allow you to enter your personal data for automatic compilation. Click on this link to download l’Auto-route (Excel File)

Should you require more information on the tax impact of using an automobile during the course of your income-generating activities. You will find below, among others, a summary of rules related to the calculation of taxable benefits, deductions for automobile expenses and travel allowances, refunds or employer advances.

We can help take you farther!

Please note that l’Auto-route is only available online.

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Jean-François Boudreault
Partner | Human resources consulting

The past few months have highlighted the importance of worker health. What can companies do to create a healthy work climate?

The pandemic has forced us to acknowledge something we already knew but failed to pay attention to: workers need to be physically and mental well in order for companies to run smoothly.

Burnout, layoffs, high turnover rates, harassment, lack of motivation and isolation—all these are warning signs that companies should be on the lookout for, even when they appear to be isolated cases. Since recurring incidents or widespread problems require major interventions, it makes sense to stay vigilant and take a preventive approach so that you don’t end up with problematic situations in which nobody wins. When red flags go up, managers and business owners should pay attention right away.

The right diagnosis

Before acting prematurely, it’s important to understand the interpersonal dynamics at play within your organization so that you can determine what interventions are needed. Problems don’t usually stem from a single cause. Most often, a combination of inter-related factors causes collateral damage and affect workers.

The work climate is based on how employees perceive their work environment. These perceptions are shaped by their needs, expectations and what they value most in a typical work situation. Factors that influence employee perceptions include team spirit, recognition, the values emphasized in the workplace, management leadership, individual roles, career development opportunities, equity, respect, the feeling of being useful, etc.

Obviously, these impressions tend to shift over time in response to changes within the organization or society at large, such as restructuring, new management or a pandemic. Employees also influence each other when they share their thoughts on these constantly changing circumstances.

In other words, the work climate reflects the group’s emotional state. These feelings are linked to how employees perceive their work situation and shaped by informal conversations with each other. Studying the work climate can therefore shed light on the wellbeing of a team, business unit or entire organization.

If an assessment reveals that your work climate is tainted by uncertainty, management might consider reviewing or updating its structure or management practices. Or the discovery might simply confirm that employees are responding negatively to a planned change (such as restructuring). Either way, it’s always important to pinpoint the right diagnosis before springing into action. You need to know what are the key drivers behind the situation so that you can focus on the right factors.

A 6-step process

Even though every organization is different, with unique operating conditions and challenges, we recommend a tried-and-true approach that’s equally effective for SMEs, non-profit organizations and major corporations, regardless of the business sector. The process contains six steps to be completed in order.

1. Define the causes and your objectives

This step allows you to fully understand the issues and determine what’s causing the issues arising in your organization (disengagement, lack of motivation, high turnover, poor attractiveness, etc.).

2. Select internal and external experts

Appoint a special committee to address the situation. If the members are in-house staff only (with no input from external experts), we recommend choosing people from different teams within your organization (HR, management, business units, supervisors, etc.). Be sure to include individuals who are directly affected by the problem.

Keep in mind that perceptions are important. An internal survey could be discredited if it’s not prepared right or appears to lack objectivity or impartiality. In fact, this would only exacerbate existing concerns. Most organizations appreciate getting help from a third party to ensure that facts are presented objectively and the situation is reviewed with impartiality. We advise companies to create a steering committee made up of internal employees and designate a project manager to liaise with the external firm and facilitate communications and logistics.

3. Determine your target group

The assessment and diagnostic exercise can either cover the entire company or just a specific unit, depending on the issue, goal, budget, time available and the size of your organization.

4. Choose the right method for collecting data (qualitative and quantitative)

Different data collection methods and tools can be used, depending on the situation. Typically, two approaches are used.

The first is qualitative. It involves collecting information through one-on-one interviews, discussions with a target group and real-time observation of what’s happening on the ground. This step gives you the chance to get a stronger understanding of the issues at hand and explore theories on what might be causing them.

The second approach is quantitative. It involves conducting surveys that are specially designed for this type of intervention. Surveys are a quick way of finding out whether your hypotheses hold true among a large sample. They also let you check in with workers on various organizational considerations related to the work climate. The information collected can help you link cause and effect.

We recommend combining both approaches so that you can cross-reference a wide range of data and either confirm or rule out your initial hypotheses.

5. Analyze and share the findings

After analyzing the results of your surveys and interviews, you have to share the findings. But the success and credibility of the entire exercise depends on getting the communications right. This means informing employees of the results and how you intend to make things better.

More specifically, once management presents the results—either to the unit involved or the entire workforce—through carefully planned internal communications, the company needs to implement measures right away so that workers don’t become disinterested or disillusioned. Instead, the idea is to empower the people involved. By ensuring your project leads to concrete action, you prove to employees that their opinions count and their engagement is essential to the success of the undertaking.

6. Draw up a game plan and stick to it

Certain corrective measures to restore the work climate within your organization should have become apparent during the previous step.

Implementing action plans is mainly the responsibility of managers and the teams themselves, though they should receive support from internal or external committees. That’s why it’s important to share all your survey results with all levels of personnel, rather than simply providing them with the organization’s overall results. Your action plan should be outlined in detail so that teams know what to expect and all actors get behind your efforts to improve the ambiance and engage teams.

Remember that effective follow-ups are the key to your success. The action plan should be developed around indicators established during the planning phase. It should also include well-defined steps so that you can track progress. A carefully designed dashboard can make it easier to compare the data collected throughout the process and anticipate corrective measures if there’s a significant gap between your target and your results. One indicator could be to plan a second survey on the work climate to be conducted in 12 or 18 months.

Take action to protect your business’s health

A work climate diagnostic exercise is a democratic and confidential method of evaluating your organization’s health. It’s a little like an annual physical at the doctor’s office. You check a set of indicators to see whether or not your system is in good working order.

For companies, the check-up involves asking employees how they feel by sending surveys to a specific group or to your entire workforce, including managers. The exercise gives you a quick and accurate reading of your organization’s health, often at a low cost.

The recent crisis may have exacerbated latent problems that were bound to surface sooner or later. It’s worth checking in now, before the situation gets worse and drags down your team’s morale and performance, affecting the employee experience and your employer brand. After all, your workforce is your most valuable asset.

13 Jan 2021  |  Written by :

Jean-François Boudreault is a partner at Raymond Chabot Grant Thornton. He is your expert in human...

See the profile

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Updated January 20, 2021

The pandemic caused by this coronavirus has tax implications for employers and employees. What are they?

Several questions have arisen since the beginning of this pandemic that prompted many companies to opt for telework:

  • What can employees deduct on their income tax return for their tax refund?
  • What about home office expenses for employees?
  • Will their internet subscription be deductible?
  • What expenses can employers reimburse?
  • What is included in the $500 non-taxable amount to reimburse telework expenses?
  • As an employer, what are my new compliance requirements?

Our experts stay abreast of the main changes and will follow developments in the measures concerning your 2020 and 2021 tax returns and taxes.

Here are the answers to the main questions about deductible expenses for employees and the treatment of reimbursements, allowances and other benefits that may be granted.

Telework equipment

Employer’s supplies refund

An employer may compensate employees for home office expenses incurred. Generally, reimbursing employees for supplies used in the course of their work, such as paper, ink or long-distance calls, does not trigger a taxable benefit for the employees. It is therefore preferable to reimburse such expenses, upon presentation of supporting evidence, rather than granting employees an allowance, which would be taxable.

Office and computer equipment expenses and $500 refund

However, if the reimbursed expenses include a personal component for the employee, a taxable benefit could be triggered. This is normally the case if the refund is for furniture or computer equipment since the employee can use them outside the duties of employment.

Expenses covered by the relief (maximum $500 per employee)

• Computer equipment (e.g. printer, monitor)
• Office equipment (e.g. chair, worktable)

However, in the exceptional context of COVID-19, the Canada Revenue Agency (CRA) and Revenu Québec both consider that repayment, on presentation of supporting documentation, of a maximum of $500 to offset the cost of purchasing personal computer and office equipment so employees can perform their work duties at home is not a taxable benefit for the employee.

Home office expenses not reimbursed by the employer

Employees can deduct an amount for home office expense and supplies used directly in performing their duties if their employment contract requires them to pay the expenses and if they are not reimbursed by their employer. These conditions must be certified in a declaration signed by your employer.

Eligible home office expenses employees can deduct include electricity, heating and maintenance but not property taxes, home insurance premiums and insurance.

Internet, cell phone and other expenses

The tax authorities have issued several guidelines governing the expenses that are deductible as home office expenses, including cell phone and Internet charges and GST-QST costs. For full details on the treatment of these expenses and to find out which deductions and expenses are eligible, consult our publication on taxes and telework during the COVID-19 era, which will be updated as government guidelines evolve.

Do not hesitate to contact our experts, who will be pleased to accompany you through this at times complex process.

The document below is updated over time according to the measures’ evolution. Download it to find out the details of these measures.

Tax planning guide - rcgt