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Shipping and fulfillment costs are ordinary business expenses, and they belong in your books in the same month as the sale they relate to. The bigger trouble is usually margin. A $60 item that cost $22 looks like a 63% margin until you add a $9 label and $4.50 for picking and packing, and then it’s 41%.
What counts as a shipping and fulfillment cost?
Anything you pay to get a paid order from your shelf to the customer’s door. That covers postage and courier labels, boxes and tape, warehouse or third-party fulfillment fees, and the returns you pay for. Some of these are direct costs of selling, like the label. Others, like a monthly storage fee, sit closer to overhead. Pick a rule, write it down and stick with it. Switching halfway through a year makes your margins impossible to compare.
What about the shipping you charge the customer? Track it as its own line. If you fold it into product revenue, you can’t tell whether delivery pays for itself or whether you’re quietly covering it out of pocket. That’s worth knowing before the holiday rush, not after.
How do I see what an order really earns?
Work it out order by order. Here is one example, run through the profit margin calculator, with made-up but realistic figures.
| Scenario | Cost to you | Customer pays | Margin |
|---|---|---|---|
| Product only | $22.00 | $60.00 | 63.3% |
| Plus $9.00 label and $4.50 pick and pack | $35.50 | $60.00 | 40.8% |
| Same, customer pays $9.00 shipping | $35.50 | $69.00 | 48.6% |
Profit drops from $38.00 to $24.50 per order once delivery is counted. Charging the customer for shipping gets back $9, but the percentage only climbs to 48.6% because the price grew too. A few bucks of shipping can look like a rounding error on one parcel and still decide whether the month ends in the black. If you run a free shipping threshold, test it with the discount calculator, since free delivery works like a discount on the order.
Is tax charged on shipping?
Goods shipped by courier or mail are taxed at the rate of the province they’re sent to. The CRA’s own example is an Alberta store shipping to an Ontario customer, where HST applies at the Ontario rate. On $60 that’s $7.80 of HST, against $3.00 of GST if the customer were in Alberta.
How a separate shipping line is treated is a different question, and we didn’t find a clear official statement for it in the pages we read, so don’t assume. Check the CRA guidance for your type of sale, or ask the CRA business line, before you set a rule in your store settings. The GST/HST calculator shows the tax for any amount and province once you know the rule.
Can I claim back the tax I pay on shipping?
If you’re registered for GST/HST, the tax you pay on costs that relate to your taxable sales can generally be claimed as an input tax credit, and carrier and fulfillment invoices are the usual candidates. The paperwork matters more than people expect. For a purchase of $30 or more, the CRA’s documentary requirements for input tax credits call for the supplier’s GST/HST registration number on top of the supplier’s name, date and total. At $150 or more you also need your own name, the payment terms and a description of what you bought. Keep the invoice itself, because a bank line won’t carry the registration number.
Not registered yet? Small supplier status depends on your worldwide taxable sales, and the limit is $30,000 in a single calendar quarter or over four quarters in a row. Near it? The HST reverse calculator backs tax out of prices you’ve already published.
What mistakes quietly eat your margin?
The most common is booking a carrier invoice once a month as a single lump. Then returns, reshipments and lost parcels never get matched to an order, and you can’t see which products lose money to delivery. The second is forgetting packaging when you set the price. The third is treating the shipping you collect as free money.
Picture Dana, who sells candles from Halifax. Her carrier bills her once a month, and she books the whole invoice under one heading. Only when she splits last quarter’s parcels by product does she see that the heavy three-wick candle loses money on every order that ships out of the Maritimes.
One more limit: the examples here use invented costs. Your carrier rates, fulfillment fees and box sizes will differ, and nobody here can verify a provider’s pricing for you. Use your own last three invoices.
What should you do this week?
Pull your last three carrier invoices and your last three fulfillment statements. Match each one to the orders it covers, and work out the real margin on your five best sellers. If a product only clears 20% after delivery, raise the price, add a shipping charge or stop offering free shipping on it. Then set up a separate account for shipping income and another for shipping costs, so next quarter’s numbers come out clean without an evening of detective work.
Where this information comes from
Place of supply and small supplier rules come from CRA’s page on when to register and start charging the GST/HST and related GST/HST pages from the Canada Revenue Agency, checked in 2026. Margin figures come from the profit margin calculator using the costs in the example. This site is independent and not affiliated with the CRA or any government.
Frequently asked questions
Are shipping costs a business expense in Canada?
Yes, postage, courier fees and packaging for paid orders are ordinary business costs. Book them in the same period as the sales they relate to.
Which province's tax applies to a shipped order?
The CRA says goods sent by mail or courier are taxed at the rate of the province they're sent to. An Alberta seller shipping to Ontario charges HST at the Ontario rate.
Do I charge GST/HST on the shipping line?
We couldn't confirm that on the CRA pages we read. Check the CRA guidance for your type of sale before you set a rule.
Can I claim GST/HST I paid on freight?
If you're a registrant, the CRA lists delivery and freight charges among claimable expenses, provided they relate to taxable sales. Keep the invoice.
Should free shipping count as a discount?
Treat it as one when you price. It lowers what an order earns, so test the margin before you set the free shipping threshold.
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