Not only is it critical to determine whether a taxable sale was made in Canada or not, but also where in Canada. If it was made (or deemed to be made) in any of the Harmonized Sales Tax (H.S.T.) provinces (Nova Scotia, New Brunswick, and Newfoundland and Labrador), a higher, thirteen percent H.S.T. rate applies (as at January 1, 2008). This is because those provinces have allowed Canada to collect their provincial sales taxes for them.
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The rationale behind this follows: Since countries can't collect sales tax on Internet transactions at their borders, the only way they can collect it (other than a self-assessment system) is with an online sales tax. Further, it is claimed that businesses in the European Union suffer a major competitive disadvantage because they have to collect Value Added Tax (VAT) but others don't.