Canadian paysite owners and GST

[Mutt]

Who knows what the real deal is on this? I've read through the DawnsPlace court decisions - she ultimately lost - court said as a Canadian business she owes the 5% GST on subscriptions to her paysite from Canadians and NON-Canadians. I don't know all the facts of her case - I think she was using her own merchant account versus third party processing based in another country - just don't know if that made a difference. I just checked out DawnsPlace's join form and there's a 'Are you required to pay GST?' checkbox on it. Weird. Maybe that's a loophole she's found?

There are hundreds of Canadian webmasters and companies operating paysites, some using merchant accounts, most using CCBILL and/or Epoch - anybody had a review for GST? And if so, what were the results?

[Elli]

I've just been asked to remit the last 4 years of GST on my Canadian customers for my paysite. Basically it's up to me to prove how many were Cdn and pay the appropriate tax. It doesn't add up to that much, thank goodness. I think it's better to just keep a little reserve fund than to ask Canadian customers to jump through extra hoops. Call it the cost of doing business, I guess. *shrug*

[directfiesta]

It is a controversial situation.

CRA have as a policy to consider " ALL " members ( regardless of their location ) as " Canadians " for tax purpose.

So they can hit you with a steep bill ...

( Direct Merchant account or ISIP changes nothing )

[Mutt]

Originally Posted by Elli

I've just been asked to remit the last 4 years of GST on my Canadian customers for my paysite. Basically it's up to me to prove how many were Cdn and pay the appropriate tax. It doesn't add up to that much, thank goodness. I think it's better to just keep a little reserve fund than to ask Canadian customers to jump through extra hoops. Call it the cost of doing business, I guess. *shrug*

Were you asked alot of questions about your business? They specifically said it was only Canadian customers they wanted the GST for? Dawn got assessed for GST on all subscriptions not just Canadians. I seem to remember somebody commenting that her doing her own processing played a part. Do you have a US corporation?

thanks for the input

[Mutt]

Originally Posted by directfiesta

( Direct Merchant account or ISIP changes nothing )

where is the source for that information? there is a difference between a Canadian business directly charging a customer and an American company like CCBILL or Epoch doing it. whether there's a difference to the CRA - i'm not sure - I see nothing online that refers to any of it.

[NoWhErE]

Do any of you guys charge GST when a member signs up?
As a canadian citizen operating a business based in Canada, you would have to charge GST on every transaction? As soon as money comes into the country, you have to charge a tax.


I might be wrong about it, but thats what I've been told.

[directfiesta]

Originally Posted by Mutt

where is the source for that information? there is a difference between a Canadian business directly charging a customer and an American company like CCBILL or Epoch doing it. whether there's a difference to the CRA - i'm not sure - I see nothing online that refers to any of it.

I printed out a PDF bible from them a while ago ( not sure if it is still on line ). They clearly stated that all members were considered canadians for tax purposes.

What I find pretty stupid is that on my hosting site, I only charge and remit GST/PST on actual clients located in Canada.

Makes sense ? No ? that is the signature of governments...

[directfiesta]

Seems it has changed in 2007 :

New zero-rating rule for exported IPP

The proposed provision will zero-rate all supplies of IPP made to persons who are non-registered non-residents when the supplies are made, except for the following supplies:

* a supply made to an individual unless the individual is outside Canada when the supply is made;
* a supply of IPP that relates to real property that is situated in Canada or to tangible personal property that is ordinarily situated in Canada;
* a supply of IPP that relates to a supply of a service that is made in Canada and is not zero-rated as an export, a transportation service or a financial service;
* a supply of IPP that may only be used in Canada; or
* a supply of making a telecommunications facility that is IPP available for use in providing a telecommunication service.

Examples of supplies of IPP to which the new rule applies

Examples of supplies of IPP that will now be eligible for zero-rating under the proposed provision include:

* subscriptions to Web sites that provide subscribers with a right to access and use digitized content on the site, such as information in a database or images, and that may also include a right to download a copy of the digitized content;
* subscriptions to interactive Web sites that provide subscribers with a right to access and use digitized content, such as games, music and videos, on the sites while they are online;
* digitized information, such as news items or stock market data, that is delivered electronically on a periodic basis to subscribers based on their personal preferences;
* digitized products, such as music, images, and books, that are downloaded from Web sites and paid for individually.

http://www.cra-arc.gc.ca/E/pub/gi/gi-034/gi-034-e.html

So it seems, if that has passed, that you need to keep a database of the customers location, and remit accordingly.

Better then before

[Mutt]

Originally Posted by NoWhErE

Do any of you guys charge GST when a member signs up?
As a canadian citizen operating a business based in Canada, you would have to charge GST on every transaction? As soon as money comes into the country, you have to charge a tax.


I might be wrong about it, but thats what I've been told.

This court case which did go to the Canadian Supreme Court says exactly that

http://www.gowlings.com/resources/en...061109.en.html

[Mutt]

Originally Posted by directfiesta

Seems it has changed in 2007 :


So it seems, if that has passed, that you need to keep a database of the customers location, and remit accordingly.

Better then before

ahhhhhhh - that may explain DawnsPlace join form with the check box for GST - that covers her ass I think - she asks the customer whether GST should be collected for his purchase

[Elli]

Yes, that 2007 decision what my accountant was describing to me.

No, CRA didn't ask a bunch of questions. They asked what product I was selling on my site, and I told them it was subscription based. That's it. They really don't care other than that. *unless you get audited for making bad deductions, etc*

I don't have a US corp.

[alex_1980]

I also noticed in Dawn's Place terms and conditions that it states that you agree not to use the content in Canada.

The part with the GST checkbox is actually if you are a GST registrant (i.e. a business with a GST #)

From my understanding, the law has changed and you are only required to charge GST/HST on subscriptions for members in Canada, or members who can use/view content while in Canada, hence the section in the T&C stating you will not use it in Canada.

[Boobgirl]

2007 federal budget law, did change so that you only charge GST on Canadian ( or non-Canadian GST-registered) customers. As such, records showing this and IPs do need to be kept on file to track your customers and know what GST amounts to file if you are Canadain based, or deemed to be doing business in Canada ( at CCRA's discretion). This ruling allows Dawnsplace.com to be refunded 90% of the GST charged to them from CCRA since the law was also made retroactive back to the start of GST, but ONLY if GST was not collected from the customers during that time.

[Boobgirl]

Originally Posted by Mutt

Were you asked alot of questions about your business? They specifically said it was only Canadian customers they wanted the GST for? Dawn got assessed for GST on all subscriptions not just Canadians. I seem to remember somebody commenting that her doing her own processing played a part. Do you have a US corporation?

thanks for the input

We did not have our own processing at the time of the audits/review and had nothing to do with the laws at that time. We were using ccbill/ibill in 2001, which is when we started the battle with CCRA regarding GST.

[minniesoporno]

Originally Posted by Elli

I've just been asked to remit the last 4 years of GST on my Canadian customers for my paysite. Basically it's up to me to prove how many were Cdn and pay the appropriate tax. It doesn't add up to that much, thank goodness. I think it's better to just keep a little reserve fund than to ask Canadian customers to jump through extra hoops. Call it the cost of doing business, I guess. *shrug*

When I was taking the H & R block tax course, we are suppose to file all income, and claim GST if your self employed even if its from an internet business such as ours.

the best thing is to put away some money every month just for tax purposes and if you do not owe anything it ends up being a great savings account.

[TheDoc]

You make a geoip login system. When a Canadian buys, they can ONLY enter while in Canada. Same with American, can only enter while in America.

Now you can log/report your Canadian only members for GST, and be sure that no other 'cross country member' can access the paysite while in Canada too.

You DO have to pay GST on at least your Canadian Members.. If you haven't been, you will owe GST on your Canadian Members - So you best geoip/archive them up now before you owe millions.

[dready]

Originally Posted by directfiesta

Seems it has changed in 2007 :


So it seems, if that has passed, that you need to keep a database of the customers location, and remit accordingly.

Better then before

http://www.cra-arc.gc.ca/E/pub/gi/gi-034/gi-034-e.html

Keep in mind, this is only a proposed provision. It is not law yet.

I put in a written request for a ruling and they came back with the above provision, but they said because it wasn't law, they couldn't give a binding ruling. They said wait untill the law passes and then put in another request.

Unless you have it in writting from GST, you're never going to be safe. That way if they come after you, you can wave the paper in their face and tell them to get lost.

[Boobgirl]

FEDERAL BUDGET 2007 - Passede Sept 07

Exports of Intangible Personal Property

11. (1) Part V of Schedule VI to the Act is amended by adding the following after section 10:

10.1 A supply of intangible personal property made to a non-resident person who is not registered under Subdivision d of Division V of Part IX of the Act at the time the supply is made, but not including

(a) a supply made to an individual unless the individual is outside Canada at that time;

(b) a supply of intangible personal property that relates to

(i) real property situated in Canada,

(ii) tangible personal property ordinarily situated in Canada, or

(iii) a service the supply of which is made in Canada and is not a zero-rated supply described by any section of this Part or Part VII or IX;

(c) a supply that is the making available of a telecommunications facility that is intangible personal property for use in providing a service described in paragraph (a) of the definition "telecommunication service" in subsection 123(1) of the Act;

(d) a supply of intangible personal property that may only be used in Canada; or

(e) a prescribed supply.

(2) Subsection (1) is deemed to have come into force on December 17, 1990 except that

(a) section 10.1 of Part V of Schedule VI to the Act, as enacted by subsection (1), does not apply to any supply in respect of which the supplier, before March 20, 2007, charged or collected any amount as or on account of tax under Part IX of the Act; and

(b) for the purposes of section 10.1 of Part V of Schedule VI to the Act, as enacted by subsection (1), the definitions "telecommunication service" and "telecommunications facility" in subsection 123(1) of the Act are deemed to have come into force on December 17, 1990.

(3) If an amount was taken into account in assessing the net tax of a person under section 296 of the Act for a reporting period of the person as tax that became collectible by the person in respect of a supply made by the person before March 20, 2007 and, by reason of the application of section 10.1 of Part V of Schedule VI to the Act, as enacted by subsection (1), no tax was collectible by the person in respect of the supply,

(a) the person shall be entitled until the day that is two years after the day on which the Act enacting this section receives royal assent to request in writing that the Minister of National Revenue make an assessment, reassessment or additional assessment for the purpose of taking into account that no tax was collectible by the person in respect of the supply; and

(b) on receipt of a request under paragraph (a), the Minister shall with all due dispatch

(i) consider the request, and

(ii) under section 296 of the Act and despite section 298 of the Act, assess, reassess or make an additional assessment of the net tax of the person for any reporting period of the person and of any interest, penalty or other obligation of the person, but only to the extent that the assessment, reassessment or additional assessment may reasonably be regarded as relating to the supply.

12. The provisions of Division IV of Part IX of the Act relating to intangible personal property will be modified in accordance with proposals described in the Budget documents tabled by the Minister of Finance in the House of Commons on March 19, 2007.


As per item 12, altough this budget was passed, how they will enforce it is still not been worked out. Better save then sorry and keep your records.

[stever]

yep what thedoc said
thats the way to do it