I work for a US company in Canada, as a contractor. They are asking me to attend a hackathon of a 3rd-party company, in which you integrate your company’s app with the 3rd party company API.
What type of Visa is needed? is it B1?
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B1 may be suitable, because it allows to "attend a ... professional ... convention or conference".
However whether your hackathon is such a convention/conference is unclear from the description you provide - and it is likely to be unclear to the consular officer. A big question is what is the purpose of this integration (to win the contract? to get paid?) and who, if anyone, is paying for the attendance - the consular officer need to make sure you're not coming to directly work for an US employer.
I would suggest asking your hackathon organizers for a "visa support letter" or "letter of invitation". This letter would describe what kind of event it is, what kind of activities you would be expected to perform, whether you'd be compensated for them, and who'd be paying the expenses.
If you are working for a Canadian company (which is subsidiary of that US company) and it pays your expenses for, and during the trip, this should be a clear case. But if you're paid from US directly (i.e. there's no Canadian company which employs you), then - and I'm not a visa expert - it is much less clear case.