There's not a way to do the restriction and the sales tax and not also have your digital items limited to buyers in the US and Canada.
I'd recommend setting up a second, higher flat rate for international orders and expanding your shipping destinations. Here's a basic outline on using shipping rules to create a special rate for the US and Canada and another one for the rest of the world:
Go to Seller Admin > Cart Shipping Settings and set the following:
Shipping Origin: select your country and enter 99999 as your zip code (assuming you are in Canada, otherwise enter your zip code)
Shipping Destinations: select nothing for Worldwide shipping, you can clear your US and Canada selections by clicking on them again;
Leave all other settings blank or 0.00;
Click Next to save settings and proceed to the Shipping Rules screen.
In the Existing Shipping Rules menu, select and Delete any Rules you may have saved there.
Set up your first Shipping Rule for Domestic shipping:
Shipping Rate Calculator: Flat
Shipping Amount: enter your flat rate
Country: Select Canada;
Click Submit to save the Rule.
Repeat these steps but with United States as the country selected.
To ship Internationally at a different rate:
Shipping Rate Calculator: Flat
Shipping Amount: enter a special international rate
Country: All Countries (i.e. the rest of your Shipping Destination countries);
Click Submit to save the Rule.
Click Back to Admin, and you're done!