Software is a crucial component of both personal and professional life. With the rise of digital transactions, it's essential to understand the financial implications of purchasing software across borders. In light of recent tariff threats between Canada and the USA, we've had several American customers ask whether they need to pay tariffs on software purchased from Canadian resellers like Keystroke.net. The answer is generally no, and here's why:
1. Nature of Software Transactions
Most software transactions today are digital. Purchasing software is typically downloaded directly from the internet rather than shipped on a physical medium like a CD or USB drive. Tariffs are usually applied to physical goods crossing borders, not digital downloads. This means that when you buy software online from a Canadian reseller, there are no physical goods to tax.
2. Trade Agreements
Notwithstanding the recent tariff threats, the United States and Canada have a long history of trade agreements facilitating the free flow of goods and services between the two countries. The most recent agreement, the United States-Mexico-Canada Agreement (USMCA), includes provisions that support digital trade and reduce barriers to cross-border e-commerce. This agreement helps ensure that digital products, like software, can be traded freely without the imposition of tariffs.
3. Taxation Policies
While tariffs may not apply, it's important to note that other taxes might. For instance, sales tax or value-added tax (VAT) could be applicable depending on the jurisdiction. However, these taxes are different from tariffs and are typically collected based on the location of the buyer or seller. In the case of software purchased from a Canadian reseller, any applicable taxes would be governed by Canadian tax laws and the specific terms of the USMCA.
4. Digital Services and Intangible Goods
Software is often classified as an intangible good, especially when delivered electronically. Intangible goods are generally not subject to the same tariff regulations as tangible goods. This classification further exempts digital software purchases from tariffs.
Conclusion
In summary, Americans do not have to pay tariffs on software purchased from Canadian resellers primarily because these transactions involve digital downloads, which are not subject to tariffs. These rules also reflect the apparent truth—imposing levies on downloadable digital purchases is almost impossible since the transactions seldom flow through regulatory services like customs, couriers, or government agencies.
