How ECommerce Works In Canada

29. 03. 2012

Are you a Canadian website owner who needs to know how to accept payment on your website?

I will provide a guide to how the system of processing and accepting credits cards from your website works.  This is not to be a technical guide for implementation, but is written instead to give website owners, entrepreneurs, project managers and others an understanding of how the systems work.

The overall system is very similar to how eCommerce works in other parts of the world; however, Canada has its own tax rules and currency challenges.

The eCommerce System

The system of accepting credits cards online is not very complicated once you understand the logistics.  This image illustrates the process.


Whether you have a few products that a visitor can purchase through a simple form or a full shopping cart, the website visitor selects the product(s) they want to purchase and presses a button that will direct them to send payment - the checkout.  At this point, information required to process the transaction is provided by the customer and is sent to an Online Gateway.  The Online Gateway provider is a company that collects the necessary information necessary to process an online credit card transaction then takes the funds and deposits it into your bank account.  Beanstream, Moneris, and InternetSecure are some of the more well-known Canadian gateway companies. The most common information forms collect the following from the customer:

  • First name
  • Last name
  • Address
  • Credit card type
  • Credit card number
  • Credit card security number
  • Credit card expiration date
  • Acceptance of terms and conditions (includes: shipping policy, security policy, refund policy, customer service contact information)


Other fields provided by the website:

  • Product title(s)
  • Dollar amount(s)


Online Gateway providers typically have a monthly fee based on volume and monetary order size of transactions.

Each credit card type (Visa, MasterCard, American Express, etc.) and currency you want to accept has their own merchant number.  A business would either contact a Merchant Provider, also called a Payment Processing Provider, to apply for these. In some instances, the Online Gateway provider may also take care of this if you don't already have one.  Chase Paymentech is a well-known Merchant Provider in Canada.  The Merchant Provider is responsible for either accepting or declining the customer's attempt to process a transaction through their credit card.

Each credit card has its own processing fees that can range between 2% to 4% on each transaction processed.

Visa and MasterCard are the easiest to get for Canadian companies. Accepting payments in USD through American Express cards as a Canadian website owner requires the website owner to have a business presence in the United States.

When the customer confirms they want to pay for a product on your website, their data is sent to the Online Gateway (typically hidden from the customer), which may then send the information to the Merchant Provider to confirm the credit card is approved. The Merchant Provider then either approves or declines the transaction with the Online Gateway and then confirms back with your website.  If the transaction is approved, the Online Gateway will transfer the money from the customer to your bank account. Each Online Gateway has different policies related to how fast the money is actually deposited into your bank account - some within 24 hours and other on specific days of the month.

If you already have merchant accounts through your business because you have a physical location that accepts credit cards and you want to provide an online payment system (eCommerce), you will need to apply for an online merchant accounts. They are different numbers.

Many banks have partnered with Online Gateways and Merchant Providers.  For instance, TD Canada Trust works with Beanstream, while RBC Royal Bank works with Moneris.  You could contact your bank for support or go through the service providers directly to negotiate rates.

At the point when a transaction is either approved or declined, a purchase receipt or notice is provided both on screen and via email.  The email receipt is branded by the selling company and typically sent from the Online Gateway system.

PayPal is a different alternative.  Using the systems above by having your own merchant, a customer's credit card statement will have your company name listed.  PayPal, on the other hand, is in essence a hosted Online Gate and Merchant Provider in one.   Instead of having your own merchant accounts, you use PayPal's and therefore on a customer's credit card statement will indicate the payment was processed through PayPal.  PayPal charges a per transaction and monthly fee for this service and is typically higher than having your own merchant accounts for the benefit of not having to go through the aforementioned setup.  Over the long-term, having your own merchant account is less expensive.

Tax Implications

Different industries have different tax implications. For instance, the tax laws you must follow if you are selling books are different than the ones applicable for selling consulting services.  The tax laws are specific to industry and province in which the company is registered.

Below is a general list of tax rates per province. However, please consult with your accountant before implementing these rates. The government can penalize your business for back taxes owed and not knowing the laws is not a valid reason for non-compliance.  For most companies selling goods and services online, taxes don't need to be applied to resident US customers. Again, please confirm with your accountant that this also applies to you.  Therefore, if a US resident purchases from your website you typically don't need to charge them Canadian tax.


Sales Tax

eCommerce Tax



HST %12

HST %12



GST %5

GST %5



GST %5/PST %5

GST %5



GST%5/PST %7

GST %5



HST %13

HST %13



GST %5/QST %9.5

GST %5



HST %13




HST %15

HST %15



HST %13




GST%5/PST %10

GST %5



GST %5

GST %5



GST %5

GST %5



GST %5

GST %5



Currency Implications

If you are planning to sell to Canadians only, Canadians prefer to be charged in Canadian dollars.  However, if you expect to be selling worldwide or predominantly to a US market, the global online currency is US dollars and most will opt to use this currency for their website.  When a Canadian company wants to accept USD, it's best to have a US bank account.  This helps save on currency conversion fees.

Shipping Implications

There are many different options when it comes to shipping.  Integrating with a courier company's system (via an API) to obtain real-time rates based on distance, size, weight and shipping type (next day air, 3 days, etc.) is one. Having a flat shipping rate is another - and there are many different combinations of options in-between.  Note that shipping outside the country may result in duties or other fees for which you or your customer may be responsible.  It's important to indicate these on your website so the customer is aware of any additional costs.


Interac in Canada is a newer form of payment online. It's widely used for companies that cater to a younger audience or those that can't get a credit card.  The systems that process these transactions are similar, however, if this payment option is selected a customer is directly to their Bank's website to login and confirm payment instead of it being done behind the scenes.  Also, instead of a percentage transaction fee the processing costs range from $0.50 to $0.90 per transaction.

Technical Development

The web designer and developer of the website and shopping cart software must take all the items above into consideration and ensure all the pieces fit together properly.

So that's how the eCommerce process works in Canada. Canadian businesses have a lot of opportunity to utilize eCommerce to grow their business both locally and internationally, and improve profit margins. So come on, Canada - let's show off our wares online!

Add new comment

All fields required.

This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.