I had the pleasure of attending an educational seminar on December 14th, 2010 hosted by Silicon Halton at Sheridan College. The focus of the meeting was on Doing Business In The US. The main speaker was Mary C. St. Mary, Trade Commissioner at Canadian Consulate General of Buffalo. She spent time telling us about the resources available to Canadian companies who wanted to do business in the US. There was also a panel of individuals from companies who are members of Silicon Halton who conduct business currently across borders who shared their insights and experiences with the group.
One of the topics that came up during the meeting is that rules for doing business on both sides of the border are changing rapidly. The current economic climate is making near bankrupt states and counties look for new sources of revenue. We were all shocked to discover that many states have legislation pending to govern doing business from outside their state. While not explicitly stated, it was implied that other Canadian provinces were also looking at new regulations. These new regulations have come out of the digital age where selling goods and services across borders is a given. If not in place already, many are looking at taxation and representation issues for companies outside their state. Some states are requiring a US presence, if not a direct presence within their state, to ensure that regional and state taxes, as well as federal taxes, are remitted.
Several members do business selling goods or services internationally, usually without actually leaving the country. These goods and services took many formats, but most were in the form of some kind of e-commerce. The tone of the questions they raised was one of “but I am very small, I am probably not even on anyone’s radar. The speaker and panel members responded, “You are probably right … for the moment … but as state and regional governments expand their search for new sources of income you will pop up sooner or later.” The implication was also made that when they come knocking, they could be looking for their due retroactively.
Mary stated that companies and individuals needed to contact the office of the Secretary of State in each state you want to do business [as well as federally] and find out what taxation and business rules applied to them. When it comes to taxation, the rules change not only for the federal aspect, but state to state and even county to county. There are places where the tax rate on one side of the street is different from the other because the county line goes down the middle of the road. If you are doing business state to state, region to region, or country to country, it is your responsibility to find out the rules before the IRS or other state or regional taxation body comes knocking at your door.
Other rules also apply. Doing business in the US also requires that you operate and obey federal and state rules and regulations like the US Patriot Act. If you are a Canadian company or doing business in Canada, you also need to follow Canadian rules, like PIPEDA [Personal Information Protection & Electronic Documents Act]. For the most part, compliance with PIPEDA covers the core of the Patriot Act; however, some sections actually have regulations that are in conflict with the US Patriot Act. These usually come in the format of philosophical undertones – “The Government’s Right To Know To Protect The Public (US)” vs. “The Individual’s Right To Privacy (Canada)”.
One big issue that did not come up which impacts doing business internationally is the requirement that credit card information cannot cross the border without full disclosure. While it seems common sense that a company doing business in the US from Canada the credit card information is going to cross the border to complete the transaction, it is a requirement you explicitly state that this will happen. Since this information passes electronically, you are charged with a responsibility to protect that information thru encryption and secure data channels throughout the transaction. Harsh penalties exist for companies who fail to ensure with 100% certainty that the information is not compromised or intercepted. Many companies outsource these transactions to companies like PayPal so they do not even handle the credit card information themselves mitigating their risk. I believe you will likely find these relationships also evolve so that companies like PayPal also handle the ‘taxes’ and they just become another line item on the invoice.
Whether you are based in Canada, UK, Australia, or even in the US, doing business across borders [be they international or regional] is becoming more complex and costly – but the economic potential is also huge.
About the Silicon Halton Blogger
Joel has 33 years experience consulting on data integration, B2B, B2C, EDI, ERP, and specialized software solutions for small business in Canada, USA, and throughout the Caribbean. He has experience with retail supply chain, franchiser software, metered billing and homegrown software solutions. Joel Baines, PMP. joel.baines@cogeco.ca