Entrepreneurship & Small Business

Use a US or Canadian Paypal account?

  • Last Updated:
  • Mar 20th, 2017 2:12 pm
[OP]
Newbie
May 20, 2012
91 posts
8 upvotes
VANCOUVER

Use a US or Canadian Paypal account?

We have a successful company selling digital products online. Up until this point, we've been using Paypal Canada as our payments provider. Most of our customers are in the US.

There are a couple of problems with this:
1. Occasionally, a US customer's credit company will decline their transaction because it's 'foreign'.
2. Sometimes, US customers will be charged a small processing fee because it's a 'foreign transaction'.
3. Paypal US accepts Discover and Amex, whereas Paypal Canada doesn't.

It would seem like a no-brainer to switch to Paypal US. But we're worried about taxation.

We have no other presence in the US, but will having a US Paypal account leave us subject to US taxes?

My accountant doesn't know (and yes I probably should ask a cross-border accountant). In the meantime, any thoughts from the people here would be much appreciated!
17 replies
Member
User avatar
Mar 28, 2012
313 posts
71 upvotes
My Kijiji sofa
No, holding a US bank acct does not count as "US presence".
Your "digital products" however could be open to interpretation of the 'delivery/consumption' location. Where are your servers and what product exactly?
I am open! Let's get on with the hacking - I assume it vibrates?
Ref: Dazz
[OP]
Newbie
May 20, 2012
91 posts
8 upvotes
VANCOUVER
Thanks JoDanrfd, interesting point.

We sell mostly ebooks. And our websites are currently hosted in the US. However, we don't have any US employees or assets. And the books sell all over the world, including lots to Canada.
Jr. Member
Feb 18, 2014
158 posts
27 upvotes
Why not open a USD merchant account with a mainstream provider in Canada?
[OP]
Newbie
May 20, 2012
91 posts
8 upvotes
VANCOUVER
gamechanger wrote:
Mar 10th, 2017 6:30 am
Why not open a USD merchant account with a mainstream provider in Canada?
I think that would still be a 'foreign' account for US customers, right? Our Paypal account is denominated in USD, but it's the jurisdiction that seems to matter.
Jr. Member
Feb 18, 2014
158 posts
27 upvotes
van800 wrote:
Mar 10th, 2017 10:09 am
I think that would still be a 'foreign' account for US customers, right? Our Paypal account is denominated in USD, but it's the jurisdiction that seems to matter.
No, from your customer's perspective, it would look like a domestic transaction.
[OP]
Newbie
May 20, 2012
91 posts
8 upvotes
VANCOUVER
gamechanger wrote:
Mar 11th, 2017 11:43 am
No, from your customer's perspective, it would look like a domestic transaction.
Good to know, thanks. I'll check it out.
Jr. Member
Feb 18, 2014
158 posts
27 upvotes
van800 wrote:
Mar 11th, 2017 11:52 am
Good to know, thanks. I'll check it out.
My pleasure. I work in the industry. If you'd like more info, feel free to pm me.
Newbie
Mar 14, 2017
41 posts
9 upvotes
gamechanger wrote:
Mar 10th, 2017 6:30 am
Why not open a USD merchant account with a mainstream provider in Canada?
This is your best bet.

Braintree + Moneris is a good option, just visit the braintree.com website. Very easy to sign up, just need to scan some documents, and sign a form (its done all online through e-mail). They have no monthly rates, and a fair rate (similar to paypal's). They are actually a subsidiary of PayPal.
Jr. Member
Feb 18, 2014
158 posts
27 upvotes
RojoRojoWine wrote:
Mar 17th, 2017 10:04 am
This is your best bet.

Braintree + Moneris is a good option, just visit the braintree.com website. Very easy to sign up, just need to scan some documents, and sign a form (its done all online through e-mail). They have no monthly rates, and a fair rate (similar to paypal's). They are actually a subsidiary of PayPal.
Inflated card brand fees as well as tiered pricing makes it cost prohibitive. Alternatively, if they are offering "flat procing", it also ends up being cost prohibitive.
Sr. Member
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Feb 9, 2009
719 posts
281 upvotes
gamechanger wrote:
Mar 11th, 2017 11:43 am
from your customer's perspective, it would look like a domestic transaction.
Can you explain, why a USD account in Canadian bank will look like domestic transaction to US customers? What if they pay by a credit card - as some charge overseas transaction fees?

For example, when folks use a US bank issued CC to buy goods in China via Paypal Canada, the US bank charges extra fees not because you bought the products in China, but because Paypal reports itself as Canadian location, so the CC server thinks they bought the products while being outside the US.
Jr. Member
Feb 18, 2014
158 posts
27 upvotes
arnycus wrote:
Mar 19th, 2017 8:36 pm
Can you explain, why a USD account in Canadian bank will look like domestic transaction to US customers? What if they pay by a credit card - as some charge overseas transaction fees?

For example, when folks use a US bank issued CC to buy goods in China via Paypal Canada, the US bank charges extra fees not because you bought the products in China, but because Paypal reports itself as Canadian location, so the CC server thinks they bought the products while being outside the US.
I'm strictly referring to cc transactions.

In your example, if it's Paypal CAD, we are looking at 2 different currencies. This is what creates the extra fees. If it's a US issued card and the merchant account is also in USD, the customer's fees should be the same as if the merchant account was US based.
[OP]
Newbie
May 20, 2012
91 posts
8 upvotes
VANCOUVER
gamechanger wrote:
Mar 20th, 2017 9:48 am
In your example, if it's Paypal CAD, we are looking at 2 different currencies. This is what creates the extra fees. If it's a US issued card and the merchant account is also in USD, the customer's fees should be the same as if the merchant account was US based.
Not always the case. We have a Paypal Canada account, denominated in USD. Some of our US customers get charged a foreign transaction fee (usually around 1%) by their credit card company, even though their payment and our account are both in USD. The fee is because the payment processor (Paypal Canada) is not in the US.
Jr. Member
Feb 18, 2014
158 posts
27 upvotes
van800 wrote:
Mar 20th, 2017 9:55 am
Not always the case. We have a Paypal Canada account, denominated in USD. Some of our US customers get charged a foreign transaction fee (usually around 1%) by their credit card company, even though their payment and our account are both in USD. The fee is because the payment processor (Paypal Canada) is not in the US.
All the more reason not to use PayPal...this would not happen with using a "standard" provider i.e. Not an aggragator such as PayPal.
Sr. Member
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Feb 9, 2009
719 posts
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gamechanger wrote:
Mar 20th, 2017 9:48 am
I'm strictly referring to cc transactions.
Could you elaborate on this part more (USD acc in CA bank credited by a US customer via CC payment)? Why it would look like a US bank transaction for the customer's CC issuer bank?

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