Cross Border Shopping Exemptions
One slightly hidden part of the budget that came out a couple of weeks ago is the cross border shopping exemptions that got tinkered with by the Federal Government. For those of you that don’t often cross the USA border, there is a certain limit to the dollar value of goods you are allowed to purchase and bring back into Canada without paying Canadian duties and taxes at the border. In truth, NAFTA has gradually been reducing the extra duties that apply to most goods over the last couple of decades anyway (I worked as a student CBSA officer for five years, so I dealt with this stuff a lot). The changes basically allow you to bring back more stuff without being asked to come in and pay at the Canadian border crossing. The big winners were the people that go down on weekend trips to “The Home of The Brave” or “48s” as we used to call them (48 hours outside of Canada is what is needed to claim the exemption). The changes are set to come into play in June of 2012.
The Dollars and Cents
There are 3 time periods that you are allowed to claim as a Canadian going into the USA. The first one is the basic 24-hour exemption. This exemption had allowed you to bring back $50 tax-free. HOWEVER, if you went over that $50 you lost the exemption altogether. The new 24-hour exemption allows for $200 worth of goods (and that is per-person in your vehicle). The 48-hour exemption was raised from $200 to $400 a few years ago, and this newest modification has it sitting at $800! Finally, the 7-day+ exemption was formerly $750, and has now been raised to $800 as well. I’m not quite sure why this exemption was proportionately raised so much less, but my best guess is that it will be the next one to rise in a couple of years.
Manitoban Case Study
If a family of four heads down to Grand Forks, North Dakota for the weekend (basically a rite of passage if you are from Winnipeg) these savings can really start to add up. The extra $400 exemption will allow each person to save an extra $48 in taxes at the border (7% PST, 5% GST) as well as any duties (especially pertinent on clothing not made in Canada or the USA). So that’s nearly $200 in savings right off the bat. Some states also allow you to apply to get your sales tax back, or else don’t charge any sales tax at all. This means you basically are shopping tax free! If you include the exemptions for a couple bottles of liquor (taxed to a crazy extent in Canada) you save almost another $100 bucks quite easily. Not that I would ever encourage an addiction to nicotine of any kind, but these products can also be had for 20-25% of the price in Canada. If you fill up your gas tank with cheap American gas (roughly $2 per gallon cheaper than our tax-laden petro products) the vacation or trip can easily pay for itself just in shopping savings (or at least that is what my girlfriend convinces me of).
Yay for Our “Petro Currency” as Mr. McGuinty Calls It
There has never been a better time to take advantage of these savings in terms of the buying power of the Canadian dollar. This actually helps cross border consumer in a couple ways. The obvious impact is that you can simply buy more with your dollar down there, since when you exchange your money you get more USD for it. The other thing that most people don’t realize is that your Canadian exemptions at the border are calculated after you convert the value of your American purchases into CAD. When the dollar was low, that would mean that buying $300 (USD) worth of goods, would net you a total of $400 (CAD) or more when figuring out your exemption at the border. With the dollar at parity, it helps you on this side of the equations as well.
I’m not exactly sure why the Canadian government decided to increase these exemption limits. It seems like a curious policy in that it is encouraging Canadian retail dollars to leave the country, especially with the dollar being pushed higher and higher. Some people have moral qualms about supporting another country at the expense of their own. I am not one of those people. The free market should take care of the problem in my mind, and as long as Canadian retailers can’t compete for my dollar, I will continue to take advantage of the situation.