Canadians ... members, billers & GST - GoFuckYourself.com

m0rph3us · 10-27-2002, 03:35 AM

Had a very interesting discussing with a friend last night about the Canadian 7% Goods and Services tax. Normally if you sell goods or provide services you have to charge all people/businesses in Canada that you serve this 7% tax(can be included in price). Sorta like the VAT in Europe.

Now for anyone that is in Canada and processes/used to process with a cross-border biller (ie IBILL, CCBILL, EURODEBIT etc..), we could say that we are doing a 'service' to the biller sending them customers (they own them, they cancel them, they have the CC info, we provide access to IBILL clients to our adult sites) and we get 85-89% of revenue. Since IBILL is outside Canada and income comes from them, there would be 0% GST charged.

Some people may say 'but they are our customers', in which case, would we have to print out a list of all transactions and note down the canadian ones and pay to the gov 7% for them revenue incurred from those transactions?

Which brings me to my next point.. what about Canadians using ProBilling ? They will get a checks/wires from ProBilling each month from their Canadian banks and since they are a Canadian business and you are a Canadian business, YOU must collect GST for the amount you are receving. This means a 7% increase in our income tax.

notjoe · 10-27-2002, 03:46 AM

Quote:

Originally posted by m0rph3us
Had a very interesting discussing with a friend last night about the Canadian 7% Goods and Services tax. Normally if you sell goods or provide services you have to charge all people/businesses in Canada that you serve this 7% tax(can be included in price). Sorta like the VAT in Europe.

Now for anyone that is in Canada and processes/used to process with a cross-border biller (ie IBILL, CCBILL, EURODEBIT etc..), we could say that we are doing a 'service' to the biller sending them customers (they own them, they cancel them, they have the CC info, we provide access to IBILL clients to our adult sites) and we get 85-89% of revenue. Since IBILL is outside Canada and income comes from them, there would be 0% GST charged.

Some people may say 'but they are our customers', in which case, would we have to print out a list of all transactions and note down the canadian ones and pay to the gov 7% for them revenue incurred from those transactions?

Which brings me to my next point.. what about Canadians using ProBilling ? They will get a checks/wires from ProBilling each month from their Canadian banks and since they are a Canadian business and you are a Canadian business, YOU must collect GST for the amount you are receving. This means a 7% increase in our income tax.

You're completely right. When a canadian company pays you VS. an american(offshore) you have to claim it ;(

Mortimer · 10-27-2002, 09:10 AM

The difference is, if you deal with probilling and you are canadian, I am pretty sure you can ask them to pay you the 7% GST on top of what they own you, because they can then claim that back in their tax report, since a company in Canada does not have to pay taxes on their products and services. (Well, they do, but then they get reimbursed by the government...)

I am sure this is one way to do it.

Mortimer

CoolE · 10-27-2002, 10:16 AM

Also, you (or ProBilling or whoever) would not pay GST on memberships paid by non-Canadians. When an American consumer or company buys from a Canadian company, they are not charged the GST. (or in the case of tourists, they are charged and then fill out a refund form to get the money back). So worst case scenario is it is 7% of your Canadian membership income, not 7% of all your membership income. Am I right?

It's probably a good question to ask ProBilling how it works.

quiet · 10-27-2002, 10:28 AM

you should read this for more info:

http://gofuckyourself.com/showthread...threadid=78280

i don't feel like discussing taxes today

rodme_him · 10-27-2002, 10:36 AM

I would check with revenue Canada about this, but in my conversation with them GST is only applicable on Tangible Products over the amount of $30,000, there is no GST charge on a membership, and if a company in Canada is charging GST on memberships, then they are screwing the consumer.

my 2 cents

quiet · 10-27-2002, 10:45 AM

Quote:

Originally posted by rodme_him
I would check with revenue Canada about this, but in my conversation with them GST is only applicable on Tangible Products over the amount of $30,000, there is no GST charge on a membership, and if a company in Canada is charging GST on memberships, then they are screwing the consumer.

my 2 cents

no, they are not screwing the consumer - it is the company that's being screwed, as we have to swallow the cost (obviously we can't charge gst to our members). the equivelent of putting cement blocks on our feet in relation to competition.

don't report gst on earnings (we didn't, as we clearly thought it didn't apply). but after a gst audit, we found out otherwise.

2 years retroactive gst on all earnings, as well as all future earnings. some one will need to fight this right to the top, in order to change the government's current policy. read the thread i posted above.

L0stMind · 10-27-2002, 11:00 AM

quiet - do have a legal firm that has any idea how the internet works? I can't seem to find one in Vancouver (on my third firm now).

And I just talked to a GST employee the other day about this subject and the guy said that even if I have an address on file that shows the client is based outside of canada (epoch sends this info in the signup emails) that I still have to charge/pay GST on any sale to that client. That client would then have to go to GST and ask for a reimbursement?! I am hoping that GST employee had his head up his ass (but somehow I fear he may be correct).

Messed up.

quiet · 10-27-2002, 11:29 AM

Quote:

Originally posted by L0stMind
quiet - do have a legal firm that has any idea how the internet works? I can't seem to find one in Vancouver (on my third firm now).

the firm i used when going through the gst audit (and looking at my options to continue fighting it) was:

http://millerthomson.ca

based out of Calgary (though we were in Banff at the time). be warned, they are breathtakingly expensive

Quote:

And I just talked to a GST employee the other day about this subject and the guy said that even if I have an address on file that shows the client is based outside of canada (epoch sends this info in the signup emails) that I still have to charge/pay GST on any sale to that client. That client would then have to go to GST and ask for a reimbursement?! I am hoping that GST employee had his head up his ass (but somehow I fear he may be correct).

yes, that sounds about right. the bullshit reasoning given to me by the gst audit board, was that an American (for example) could have signed up for a membership while in Canada on vacation. Therefore GST must be charged in all cases. i shit you not.

here's a quick quote from a Miller Thomson email i just found:

Quote:

As we have previously discussed, the taxation of electronic commerce is unresolved. Specifically GST.

indeed.

L0stMind · 10-27-2002, 11:36 AM

Quote:

Originally posted by quiet

the firm i used when going through the gst audit (and looking at my options to continue fighting it) was:

http://millerthomson.ca

based out of Calgary (though we were in Banff at the time). be warned, they are breathtakingly expensive

Thanks, I expected they would be expensive but I am soo tired of explaining what this "internet thing" is every time I talk to my lawyers.....

Quote:

Originally posted by quiet

yes, that sounds about right. the bullshit reasoning given to me by the gst audit board, was that an American (for example) could have signed up for a membership while in Canada on vacation. Therefore GST must be charged in all cases. i shit you not

That is EXACTLY the same type of BS I am dealing with now. I REALLY do not want to pay GST on all my earnings for the past two years.

Wasn't GST supposed to be a temporary tax? Who the hell let that one slip by?

Jer · 10-27-2002, 11:39 AM

Taxes for internet stuff is fucked up in all countries

They have no idea of what they're talking about and dealing with. It's just "GIMME THE MONEY"

archer · 10-27-2002, 11:40 AM

Quote:

Originally posted by L0stMind

That is EXACTLY the same type of BS I am dealing with now. I REALLY do not want to pay GST on all my earnings for the past two years.

Wasn't GST supposed to be a temporary tax? Who the hell let that one slip by?

only the silly braniacs who take what Liberals say as gospel believe that.

quiet · 10-27-2002, 12:05 PM

Quote:

Originally posted by L0stMind
That is EXACTLY the same type of BS I am dealing with now. I REALLY do not want to pay GST on all my earnings for the past two years.

hopefully you can avoid it. so you are audited then?

i will be creeping towards 1000K paid out to GST by the end of November. put that in your pipe and smoke it lol

jojojo · 10-27-2002, 12:25 PM

Quiet, as a free site operator - do I need to get a GST number and start paying 7%?

What about consulting fees - payed by an american firm - does GST need to be payed on that?

Are you saying that regardless of how the income is generated and regardless of your business organization (corp, sole, or none) - if it comes from the US you must pay GST on it?

BTW - what overall tax % are you canadians paying?

I never did anything with GST last year and paid around 23% tax.

quiet · 10-27-2002, 12:28 PM

Quote:

Originally posted by jojojo
Quiet, as a free site operator - do I need to get a GST number and start paying 7%?

What about consulting fees - payed by an american firm - does GST need to be payed on that?

Are you saying that regardless of how the income is generated and regardless of your business organization (corp, sole, or none) - if it comes from the US you must pay GST on it?

BTW - what overall tax % are you canadians paying?

I never did anything with GST last year and paid around 23% tax.

free sites - well, if you're paid via affiliates i don't see why you'd have anything to worry about (but i'm no expert). my situation is with paysites. specifically membership fees.

i'd talk to a lawyer if you're concerned about anything...

we are taxed to death here in Canada

m0rph3us · 10-27-2002, 12:30 PM

Hmmm this debate would be valid if the members are considered OURS. But IMO they belong to IBILL/CCBILL. I mean we provide a service for IBILL/CCBILL for members from their system to access our sites. IBILL sends us the check and keeps a %. IBILL is from US, no GST right ? I mean the billing-to-billing relationship is ibill to customer.

If you consider the customer to be yours, then do you claim 24.95 or whatever the membership price as gross and then deduct the 11% from IBILL as deduction and so on ?

quiet · 10-27-2002, 12:31 PM

Quote:

Originally posted by m0rph3us
Hmmm this debate would be valid if the members are considered OURS. But IMO they belong to IBILL/CCBILL. I mean we provide a service for IBILL/CCBILL for members from their system to access our sites. IBILL sends us the check and keeps a %. IBILL is from US, no GST right ? I mean the billing-to-billing relationship is ibill to customer.

If you consider the customer to be yours, then do you claim 24.95 or whatever the membership price as gross and then deduct the 11% from IBILL as deduction and so on ?

there is nothing open up to debate. they will take 7% if they find out you run a pay site.

but hey, don't take my word for it

i don't claim/consider the customer to be anything. the government does that.

i pay gst on actual wired money coming in every two weeks.

m0rph3us · 10-27-2002, 12:32 PM

Quote:

Originally posted by jojojo
Quiet, as a free site operator - do I need to get a GST number and start paying 7%?

What about consulting fees - payed by an american firm - does GST need to be payed on that?

Are you saying that regardless of how the income is generated and regardless of your business organization (corp, sole, or none) - if it comes from the US you must pay GST on it?

BTW - what overall tax % are you canadians paying?

I never did anything with GST last year and paid around 23% tax.

I believe you'd only pay GST if you make over 25-30k per year and if the affiliate program is from Canada (ie... Gammae, Platinum, AdultBouncer). Kinda stupid if you ask me because this discourages Canadian B2B relationships.

SleazyDream · 10-27-2002, 12:50 PM

Quote:

Originally posted by quiet

there is nothing open up to debate. they will take 7% if they find out you run a pay site.

but hey, don't take my word for it

i don't claim/consider the customer to be anything. the government does that.

i pay gst on actual wired money coming in every two weeks.

wouldn't it make sense to open a US company to avoid this then?

quiet · 10-27-2002, 12:57 PM

Quote:

Originally posted by SleazyDream

wouldn't it make sense to open a US company to avoid this then?

it was a possibility we looked at at the time.

but there were and are many negatives. you open yourself up to US litigation. you open yourself up to US obscenity laws. you expose youself up to US IRS tracking.

of course, with the new visa regulations, it's becoming a lot more difficult (but not impossible) to avoid the above

i'll go after my gst at the proper time

SleazyDream · 10-27-2002, 01:02 PM

Quote:

Originally posted by quiet

it was a possibility we looked at at the time.

but there were and are many negatives. you open yourself up to US litigation. you open yourself up to US obscenity laws. you expose youself up to US IRS tracking.

of course, with the new visa regulations, it's becoming a lot more difficult (but not impossible) to avoid the above

i'll go after my gst at the proper time

i'm going to be speakign about this with my accountant on mon - but just another idea.

you stated something about blocking canadian IPS and that it wasn't sufficent- what about a disclaimer as well that says you cannot purchase if you are located in canada at the time of purchase?

with a seperate link for canadians and people who are located in caanda at time of purchase so you can have seperate tracking on them?

m0rph3us · 10-27-2002, 01:10 PM

Quote:

Originally posted by quiet

there is nothing open up to debate. they will take 7% if they find out you run a pay site.

but hey, don't take my word for it

i don't claim/consider the customer to be anything. the government does that.

i pay gst on actual wired money coming in every two weeks.

I'm guessing you wouldn't know anything about affiliate programs right? If someone gets paid from the US for referring memberships.. they still have to pay 7% on all income ?

SleazyDream · 10-27-2002, 01:12 PM

Quote:

Originally posted by m0rph3us

I'm guessing you wouldn't know anything about affiliate programs right? If someone gets paid from the US for referring memberships.. they still have to pay 7% on all income ?

I'll let you know what my accountant says - but affiliate income I would think would be treated more like a paycheck of sales comissions.

m0rph3us · 10-27-2002, 01:14 PM

another thing...

GST must be paid out from gross... if you sell membership at 19.95 then you have to pay 7% from 19.95 ? Then the 11% from IBILL would just be a deduction on the income tax ?

quiet · 10-27-2002, 01:16 PM

Quote:

Originally posted by SleazyDream

i'm going to be speakign about this with my accountant on mon - but just another idea.

you stated something about blocking canadian IPS and that it wasn't sufficent- what about a disclaimer as well that says you cannot purchase if you are located in canada at the time of purchase?

with a seperate link for canadians and people who are located in caanda at time of purchase so you can have seperate tracking on them?

yes, we figured out a way to block all canadian subscribers based on their credit card mailing address. along with a disclaimer.

that's when they said that because an American/etc could be vacationing in Canada at the time they signed up, everyone MUST pay GST initially.

most (maybe all) accountants will tell you that you should be fine (ours did for many years). our current accountant is still blown away by what ended up happening. we had no idea the govt would take this position until the audit - and at that point we got the tax lawyers involved. ugly.

edited to again emphasize that this is from the position of a paysite owner ONLY. regardless, talk to a tax lawyer if you are concerned...

quiet · 10-27-2002, 01:18 PM

Quote:

Originally posted by m0rph3us
another thing...

GST must be paid out from gross... if you sell membership at 19.95 then you have to pay 7% from 19.95 ? Then the 11% from IBILL would just be a deduction on the income tax ?

dude, talk to a lawyer. sorry, but i don't want to start giving out advice here on how to handle things :)

m0rph3us · 10-27-2002, 01:23 PM

Examples of goods and services taxable at 7% or 15% include:

commercial real property and newly constructed residential real property;
rentals of commercial real property;
sales and leases of automobiles;
gasoline;
car repairs;
soft drinks, candies, and potato chips;
clothing and footwear;
advertising unless provided to a non-resident of Canada who is not registered for GST/HST ;

Examples of goods and services taxable at 0% (zero-rated) include:

basic groceries such as milk, bread, and vegetables;
agricultural products such as grain, raw wool, and dried tobacco leaves;
most farm livestock;
most fishery products such as fish for human consumption;
prescription drugs and drug dispensing fees;
medical devices such as hearing aids and artificial teeth; and
exports most goods and services taxable at 7% or 15% in Canada are zero-rated when exported

quiet · 10-27-2002, 01:31 PM

Quote:

Originally posted by m0rph3us
Examples of goods and services taxable at 7% or 15% include:

commercial real property and newly constructed residential real property;
rentals of commercial real property;
sales and leases of automobiles;
gasoline;
car repairs;
soft drinks, candies, and potato chips;
clothing and footwear;
advertising unless provided to a non-resident of Canada who is not registered for GST/HST ;

Examples of goods and services taxable at 0% (zero-rated) include:

basic groceries such as milk, bread, and vegetables;
agricultural products such as grain, raw wool, and dried tobacco leaves;
most farm livestock;
most fishery products such as fish for human consumption;
prescription drugs and drug dispensing fees;
medical devices such as hearing aids and artificial teeth; and
exports most goods and services taxable at 7% or 15% in Canada are zero-rated when exported

yes, that's basic information.

if you find a way to get back all of my gst yourself - i'll pay you $25000. no joke. it's going to cost me much more than that to fight this (when i eventually do).

as soon as it's all back, i'll write you a check.

SleazyDream · 10-27-2002, 01:33 PM

Quote:

Originally posted by quiet

yes, we figured out a way to block all canadian subscribers based on their credit card mailing address. along with a disclaimer.

that's when they said that because an American/etc could be vacationing in Canada at the time they signed up, everyone MUST pay GST initially.

most (maybe all) accountants will tell you that you should be fine (ours did for many years). our current accountant is still blown away by what ended up happening. we had no idea the govt would take this position until the audit - and at that point we got the tax lawyers involved. ugly.

edited to again emphasize that this is from the position of a paysite owner ONLY. regardless, talk to a tax lawyer if you are concerned...

thanks for your input on this. I really appreciate your info on this as much of this pertains to several ventures I'm involved in and will require some serious investigation with my tax and legal advisors.

m0rph3us · 10-27-2002, 01:33 PM

Quote:

Originally posted by quiet
i'll write you a check.

But you're Canadian so then I'd have to pay GST on that 25k

SleazyDream · 10-27-2002, 01:35 PM

Quote:

Originally posted by quiet

yes, that's basic information.

if you find a way to get back all of my gst yourself - i'll pay you $25000. no joke. it's going to cost me much more than that to fight this (when i eventually do).

as soon as it's all back, i'll write you a check.

make it fair for the guy, 5-10% of your traffic probally was canadian and most likly you'll have to pay GST on that. tell him if he gets 90% of the gross GST you paid back you'll pay him $25,000. :P

Manga1 · 10-27-2002, 01:46 PM

Some of you guys may find this interesting if you can sift through a lot of the boring crap that doesn't apply to us http://www.ccra-adrc.gc.ca/tax/techn...scussion-e.pdf

quiet · 10-27-2002, 01:54 PM

Quote:

Originally posted by SleazyDream

make it fair for the guy, 5-10% of your traffic probally was canadian and most likly you'll have to pay GST on that. tell him if he gets 90% of the gross GST you paid back you'll pay him $25,000. :P

hehe

jojojo · 10-27-2002, 02:18 PM

Can someone find out about US affiliate programs - whether or not we need to pay GST on that income? I'm sure most of us Canadians all use them to some degree.

I am still looking for a Canadian tax attorney that understands all of this.

Mortimer · 10-27-2002, 02:22 PM

Quote:

Originally posted by Manga1
Some of you guys may find this interesting if you can sift through a lot of the boring crap that doesn't apply to us http://www.ccra-adrc.gc.ca/tax/techn...scussion-e.pdf

Ok, I don't know if this set of recommandation has been approved by the government or not, but if these are the rules concerning electronic commerce and that they must be applied by the GST board, there is something very interesting at the end of page 62-beginning of page 63. From what I have read in the pages before that, the comittee considers the type of product we deliver an Intangible Personnal Property, but I cannot seem to find if we get in the category "Intellectual Property" or not. This is a major difference, since if our product is considered to be an "Intangible Personnal Property that is Intellectual Property", we should be able to have terms and conditions in the contract that prohibit the use of our product in Canada, and therefore we would not have to charge taxes to "non-resident and non-registered". We would have to charge taxes to all those that are residents, registered or have permanent establishment, but that means a small percentage of the overall number of customers.

However, if our product is considered to be an Intangible Personnal Property that is not Intellectual Property, we are required to charge taxes to everyone because of that argument:
"As there are no restrictions on the place of use of the intangible personnal property, the supply is made in Canada. The supplier is reuiqred to collect tax. Since this is a supply of intabgible personnal property other than intellectual property the supply is not eligible for zero-rating."

I am going to try and find if our product is considered to be of intellectual property. That would make a huge difference.

Of course, that only applies if those recommandations are now effective.

SleazyDream · 10-27-2002, 02:26 PM

Quote:

Originally posted by jojojo
Can someone find out about US affiliate programs - whether or not we need to pay GST on that income? I'm sure most of us Canadians all use them to some degree.

I am still looking for a Canadian tax attorney that understands all of this.

I can't see affiliate income as being any different than sales commission - which is what it is and not GSTable.
But I will find out.

m0rph3us · 10-27-2002, 02:49 PM

Page 60 of that pdf.... 'a supply of a service made to a non-resident person is zero rated' however in the exclusions from the zero taxable provision they say: "a service of acting as an agent of the non resident person or of arranging for, procurring or soliciting orders for suppliers by or to the person." hmmm

now even lower they say there are zero rated provisions for stuff excluded from them the general provision such as:
a supply of advertising service made to a non resident person who is not registered.

Looks to me like they are contradicting themselves.

CoolE · 10-27-2002, 03:18 PM

Interesting stuff above.

I've been through two GST audits in the last 4 years.

My first when all my income was as an affiliate. My accountant wrote a letter explaining how the income was all sales commission paid from US companies, and they were satisfied with that.

The second was this last summer. My income for the tax year was now 95% from my own paysite, so the situation was different. This time the accountant explained in a letter how the members are CCBill's member's (and not really mine) as proven by the fact that I do not have access to their credit card numbers at any time and CCBill has primary control over the usernames and passwords, and therefore again the sales revenue is zero-rated. Again, they were satisfied with that.

That's not to say that this is is the end of it. The accountant said that the GST tax code is somewhat vague in this area. But the info we supplied seemed to satisfy the particular auditor we had.

jojojo · 10-27-2002, 04:39 PM

Whoa CoolE that is great for you, and quite the opposite of what all the other Canadian paysite owners are experiencing.

Thanks for looking into it Sleazy - it will be interesting to hear what your people say.

In this other thread:
http://gofuckyourself.com/showthread...threadid=78280

Doc says:

Quote:

As massivecock said we are a Canadain company going through the same GST issues.

Here is the issue.
Normal companies collecting money from the states or other countries pay GST (goods and services tax) on any income that they earn.

The only companies that do not pay GST in Canada are ones that create package or shipped products and sell them to international buyers.

With internet companies that don't deal in package or shipped products they have to pay GST. As the products being sold are virtual products. Such as members, sponsor signups, traffic, anything on the internet that is not a package or shipped.

The new law put's internet companies in the normal business standard which does not deal with package or shipped products.

Now it sucks knowning they are going to take an extra 7%. If they ONLY do this to you, be very happy. If they want they can go back to the day you started your business and make you pay 7% on all that money ever earned. We are going to have to pay back taxes which is what we are fighting. We have nothing to fight with on paying 7% on all the new monies that we earn.

The only time we wont pay 7% is when we ship a product like a video to the states.

Only way to stop the 7% tax is leave Canada.

If you are wondering pretty much any porn company in Canada will be under this. Content companies, free sites, paysites, avs, traffic brokers, ect.

.

It seems that paysite revenue and sponsor revenue are grey areas. What about web consulting fees collected from Americans?

Smith · 10-27-2002, 05:14 PM

Quote:

Originally posted by jojojo
It seems that paysite revenue and sponsor revenue are grey areas. What about web consulting fees collected from Americans?

See thats my concern too, I've been doing what could be classified as consulting. I spoke briefly to an accoutant the other day and he advised me to speak to some accoutants that deal with offshore stuff.

Student · 10-27-2002, 05:59 PM

My dog is 13 years old
I pay 7% tax on her food!!
yet I pay 0% tax on my canned stew!
Sometimes when the labels fall off I cant tell the difference

directfiesta · 10-27-2002, 06:11 PM

Quote:

Originally posted by Student
My dog is 13 years old
I pay 7% tax on her food!!
yet I pay 0% tax on my canned stew!
Sometimes when the labels fall off I cant tell the difference

L0stMind · 10-27-2002, 07:39 PM

quiet - we recently filed for GST and made a claim for over $10k in refund (I didn't want to file it because I KNEW it would draw attention but the accountant made me file) and sure enough, I got a letter from GST asking me to explain my position.

I called the contact number and spoke to the guy and he was pretty nice about it and said as long as I faxed or mailed in something letting him know why we asked for a refund (most of our clients are US based and we have recently purchased quite a bit of hardware for resale in Canada) We would recieve the refund shortly. And surprise, we actually received a check within a few weeks.

However, when I called the same guy at GST again to thank him for the fast turn around in getting me the refund he basically told me I could expect a GST audit soon. My business # has been red flagged now or somesuch.

So, I am now attempting to ensure I have all my ducks in a row and my arguments fully prepared. I REALLY would hate to have to pay over $140k in GST at once. Over two years worth of revenue from non Canadian sales. We have been paying GST on Canadian sales already - which is fine since Canadian revenue is such a small % of our incomes... and I feel that is the spirit of the whole GST tax anyways.

But I am starting to get a little nervous. Your story is definitely not heartening.

Thanks for the info BTW.

quiet · 10-27-2002, 07:47 PM

Quote:

Originally posted by L0stMind
quiet - we recently filed for GST and made a claim for over $10k in refund (I didn't want to file it because I KNEW it would draw attention but the accountant made me file) and sure enough, I got a letter from GST asking me to explain my position.

I called the contact number and spoke to the guy and he was pretty nice about it and said as long as I faxed or mailed in something letting him know why we asked for a refund (most of our clients are US based and we have recently purchased quite a bit of hardware for resale in Canada) We would recieve the refund shortly. And surprise, we actually received a check within a few weeks.

However, when I called the same guy at GST again to thank him for the fast turn around in getting me the refund he basically told me I could expect a GST audit soon. My business # has been red flagged now or somesuch.

So, I am now attempting to ensure I have all my ducks in a row and my arguments fully prepared. I REALLY would hate to have to pay over $140k in GST at once. Over two years worth of revenue from non Canadian sales. We have been paying GST on Canadian sales already - which is fine since Canadian revenue is such a small % of our incomes... and I feel that is the spirit of the whole GST tax anyways.

But I am starting to get a little nervous. Your story is definitely not heartening.

Thanks for the info BTW.

no problem :)

we got audited for the exact same reason you were. very high input tax credit for gst. i'm not completely sure what your exact business is, but i run paysites, so all income is generated from memberships. less than 5% are Canadian.

m0rph3us · 10-27-2002, 08:13 PM

Quote:

Originally posted by quiet

no problem

we got audited for the exact same reason you were. very high input tax credit for gst. i'm not completely sure what your exact business is, but i run paysites, so all income is generated from memberships. less than 5% are Canadian.

what if you didn't claim that very high tax credit

? Maybe they would just let it slide...

WiredGuy · 10-27-2002, 08:22 PM

Quote:

Originally posted by L0stMind
quiet - we recently filed for GST and made a claim for over $10k in refund (I didn't want to file it because I KNEW it would draw attention but the accountant made me file) and sure enough, I got a letter from GST asking me to explain my position.

I called the contact number and spoke to the guy and he was pretty nice about it and said as long as I faxed or mailed in something letting him know why we asked for a refund (most of our clients are US based and we have recently purchased quite a bit of hardware for resale in Canada) We would recieve the refund shortly. And surprise, we actually received a check within a few weeks.

However, when I called the same guy at GST again to thank him for the fast turn around in getting me the refund he basically told me I could expect a GST audit soon. My business # has been red flagged now or somesuch.

So, I am now attempting to ensure I have all my ducks in a row and my arguments fully prepared. I REALLY would hate to have to pay over $140k in GST at once. Over two years worth of revenue from non Canadian sales. We have been paying GST on Canadian sales already - which is fine since Canadian revenue is such a small % of our incomes... and I feel that is the spirit of the whole GST tax anyways.

But I am starting to get a little nervous. Your story is definitely not heartening.

Thanks for the info BTW.

Yup... sounds too familiar. I am waiting for my GST refund of about $4k. I went thru the same hoops trying to make them happy, explaining our business, details of every transaction we did (a 42 page fax btw), and after all that the woman i spoke to it sounds fine. Three days later, GST audit. That was in March. I have still yet to see a single penny of that refund and it's been pending since then.

I hate revenue canada, or their new fancy name, CCRA.
WG

SleazyDream · 10-27-2002, 09:23 PM

Quote:

Originally posted by CoolE
Interesting stuff above.

I've been through two GST audits in the last 4 years.

My first when all my income was as an affiliate. My accountant wrote a letter explaining how the income was all sales commission paid from US companies, and they were satisfied with that.

The second was this last summer. My income for the tax year was now 95% from my own paysite, so the situation was different. This time the accountant explained in a letter how the members are CCBill's member's (and not really mine) as proven by the fact that I do not have access to their credit card numbers at any time and CCBill has primary control over the usernames and passwords, and therefore again the sales revenue is zero-rated. Again, they were satisfied with that.

That's not to say that this is is the end of it. The accountant said that the GST tax code is somewhat vague in this area. But the info we supplied seemed to satisfy the particular auditor we had.

I'm wondering if the difference would be if you were using your merchant account or their merchant account?

Quiet - (not sure If I should ask this and don't answer if you feel it breaks some sort of confidential info) do you have your own merchant account or do you use Ibill's?

SleazyDream · 10-28-2002, 01:53 PM

talked to my ca today about this - very detailed stuff. Canadians should take a good hard look at how they structure their business in regards to this issue.

WiredGuy · 10-28-2002, 10:26 PM

To Quiet> Just a thought, but wouldn't you be able to put something in the signup form such as Check this box if your a canadian citizen/resident checkbox? Seems that would be enough to filter out canadians to me. Just a thought, I imagine you've explored these options very thouroughly, but you never know...

WG

m0rph3us · 10-29-2002, 12:23 AM

ok, CCRA released the new guidelines for ecommerce in september. http://www.ccra-adrc.gc.ca/E/pub/gm/b-090/b-090-e.pdf

Basically here is the jist of the 32 pages:

For affiliates:
if you get paid for advertising a company's sites/product and they aren't located in Canada or registered in Canada for a GST number, you are providing a zero-rated service. 0% GST, you can still claim tax credits. If you're canadian and use Canadian sponsors, you pay GST on the paychecks you get.

For paysite owners:
Tricky.
According to that paper, if you sell membership to a website and allow users to view/access/download content that isn't your intellectualy property (trademark, patent copyright) then you have to charge/pay PST. From what I saw there, content that is your intellectual property then you are qualified for a 0% rating. It's usually when you do your own billing or have a merchant that you would would be under this braket.

Now it can be argued that you provide a service to ibill ccbill, who are non residents/non registered businesses, to allow their customers to access your website in which case you would qualify to the advertising exclusion. It's IBILL that bills the customers and you get a % of the sales (85-89%).

10-27-2002, 03:35 AM	#1
m0rph3us Confirmed User Join Date: Mar 2001 Location: Principality of Sealand Posts: 2,033	Canadians ... members, billers & GST Had a very interesting discussing with a friend last night about the Canadian 7% Goods and Services tax. Normally if you sell goods or provide services you have to charge all people/businesses in Canada that you serve this 7% tax(can be included in price). Sorta like the VAT in Europe. Now for anyone that is in Canada and processes/used to process with a cross-border biller (ie IBILL, CCBILL, EURODEBIT etc..), we could say that we are doing a 'service' to the biller sending them customers (they own them, they cancel them, they have the CC info, we provide access to IBILL clients to our adult sites) and we get 85-89% of revenue. Since IBILL is outside Canada and income comes from them, there would be 0% GST charged. Some people may say 'but they are our customers', in which case, would we have to print out a list of all transactions and note down the canadian ones and pay to the gov 7% for them revenue incurred from those transactions? Which brings me to my next point.. what about Canadians using ProBilling ? They will get a checks/wires from ProBilling each month from their Canadian banks and since they are a Canadian business and you are a Canadian business, YOU must collect GST for the amount you are receving. This means a 7% increase in our income tax. __________________ <font size="2" face="Tahoma"><a href="http://www.18blowjobs.com/webmasters/?640" target="_blank">Get paid $25 per signup</a> listing over <a href="http://galleries.18blowjobs.com/hosted.html" target="_blank">100 free hosted video galleries</a> - <a href="http://www.18blowjobs.com/webmasters/?640" target="_blank">Check it</a> » </font> Last edited by m0rph3us; 10-27-2002 at 03:43 AM..

10-27-2002, 10:36 AM	#6
rodme_him Registered User Join Date: Oct 2002 Location: Ontario Canada Posts: 51	I would check with revenue Canada about this, but in my conversation with them GST is only applicable on Tangible Products over the amount of $30,000, there is no GST charge on a membership, and if a company in Canada is charging GST on memberships, then they are screwing the consumer. my 2 cents __________________ <center> <b>A good webmaster is a happy webmaster</b> </center>

10-27-2002, 12:25 PM	#14
jojojo Too lazy to set a custom title Join Date: Mar 2002 Location: Vancouver, BC Posts: 2,318	Quiet, as a free site operator - do I need to get a GST number and start paying 7%? What about consulting fees - payed by an american firm - does GST need to be payed on that? Are you saying that regardless of how the income is generated and regardless of your business organization (corp, sole, or none) - if it comes from the US you must pay GST on it? BTW - what overall tax % are you canadians paying? I never did anything with GST last year and paid around 23% tax. __________________ Learn SEO - make $$ residually - icq me 333485092

10-27-2002, 12:30 PM	#16
m0rph3us Confirmed User Join Date: Mar 2001 Location: Principality of Sealand Posts: 2,033	Hmmm this debate would be valid if the members are considered OURS. But IMO they belong to IBILL/CCBILL. I mean we provide a service for IBILL/CCBILL for members from their system to access our sites. IBILL sends us the check and keeps a %. IBILL is from US, no GST right ? I mean the billing-to-billing relationship is ibill to customer. If you consider the customer to be yours, then do you claim 24.95 or whatever the membership price as gross and then deduct the 11% from IBILL as deduction and so on ? __________________ <font size="2" face="Tahoma"><a href="http://www.18blowjobs.com/webmasters/?640" target="_blank">Get paid $25 per signup</a> listing over <a href="http://galleries.18blowjobs.com/hosted.html" target="_blank">100 free hosted video galleries</a> - <a href="http://www.18blowjobs.com/webmasters/?640" target="_blank">Check it</a> » </font>

10-27-2002, 01:14 PM	#24
m0rph3us Confirmed User Join Date: Mar 2001 Location: Principality of Sealand Posts: 2,033	another thing... GST must be paid out from gross... if you sell membership at 19.95 then you have to pay 7% from 19.95 ? Then the 11% from IBILL would just be a deduction on the income tax ? __________________ <font size="2" face="Tahoma"><a href="http://www.18blowjobs.com/webmasters/?640" target="_blank">Get paid $25 per signup</a> listing over <a href="http://galleries.18blowjobs.com/hosted.html" target="_blank">100 free hosted video galleries</a> - <a href="http://www.18blowjobs.com/webmasters/?640" target="_blank">Check it</a> » </font>

10-27-2002, 09:10 AM	#3
Mortimer Confirmed User Join Date: Oct 2002 Location: Where the hell am I now? Posts: 153	The difference is, if you deal with probilling and you are canadian, I am pretty sure you can ask them to pay you the 7% GST on top of what they own you, because they can then claim that back in their tax report, since a company in Canada does not have to pay taxes on their products and services. (Well, they do, but then they get reimbursed by the government...) I am sure this is one way to do it. Mortimer

10-27-2002, 10:16 AM	#4
CoolE Confirmed User Join Date: Jul 2002 Location: Canada Posts: 451	Also, you (or ProBilling or whoever) would not pay GST on memberships paid by non-Canadians. When an American consumer or company buys from a Canadian company, they are not charged the GST. (or in the case of tourists, they are charged and then fill out a refund form to get the money back). So worst case scenario is it is 7% of your Canadian membership income, not 7% of all your membership income. Am I right? It's probably a good question to ask ProBilling how it works.

10-27-2002, 10:28 AM	#5
quiet we'll miss you our friend. RIP Industry Role: Join Date: Sep 2001 Location: Fernie, BC Posts: 25,115	you should read this for more info: http://gofuckyourself.com/showthread...threadid=78280 i don't feel like discussing taxes today

10-27-2002, 11:00 AM	#8
L0stMind Confirmed User Join Date: Sep 2002 Location: Vancity Posts: 1,681	quiet - do have a legal firm that has any idea how the internet works? I can't seem to find one in Vancouver (on my third firm now). And I just talked to a GST employee the other day about this subject and the guy said that even if I have an address on file that shows the client is based outside of canada (epoch sends this info in the signup emails) that I still have to charge/pay GST on any sale to that client. That client would then have to go to GST and ask for a reimbursement?! I am hoping that GST employee had his head up his ass (but somehow I fear he may be correct). Messed up.

10-27-2002, 11:39 AM	#11
Jer God is Brazilian Join Date: Feb 2001 Location: Brazil Posts: 10,601	Taxes for internet stuff is fucked up in all countries They have no idea of what they're talking about and dealing with. It's just "GIMME THE MONEY"

10-27-2002, 01:23 PM	#27
m0rph3us Confirmed User Join Date: Mar 2001 Location: Principality of Sealand Posts: 2,033	Examples of goods and services taxable at 7% or 15% include: commercial real property and newly constructed residential real property; rentals of commercial real property; sales and leases of automobiles; gasoline; car repairs; soft drinks, candies, and potato chips; clothing and footwear; advertising unless provided to a non-resident of Canada who is not registered for GST/HST ; Examples of goods and services taxable at 0% (zero-rated) include: basic groceries such as milk, bread, and vegetables; agricultural products such as grain, raw wool, and dried tobacco leaves; most farm livestock; most fishery products such as fish for human consumption; prescription drugs and drug dispensing fees; medical devices such as hearing aids and artificial teeth; and exports most goods and services taxable at 7% or 15% in Canada are zero-rated when exported __________________ <font size="2" face="Tahoma"><a href="http://www.18blowjobs.com/webmasters/?640" target="_blank">Get paid $25 per signup</a> listing over <a href="http://galleries.18blowjobs.com/hosted.html" target="_blank">100 free hosted video galleries</a> - <a href="http://www.18blowjobs.com/webmasters/?640" target="_blank">Check it</a> » </font>

10-27-2002, 01:46 PM	#32
Manga1 Confirmed User Join Date: Oct 2001 Location: Malakiaville Posts: 952	Some of you guys may find this interesting if you can sift through a lot of the boring crap that doesn't apply to us http://www.ccra-adrc.gc.ca/tax/techn...scussion-e.pdf

10-27-2002, 02:18 PM	#34
jojojo Too lazy to set a custom title Join Date: Mar 2002 Location: Vancouver, BC Posts: 2,318	Can someone find out about US affiliate programs - whether or not we need to pay GST on that income? I'm sure most of us Canadians all use them to some degree. I am still looking for a Canadian tax attorney that understands all of this. __________________ Learn SEO - make $$ residually - icq me 333485092

10-27-2002, 02:49 PM	#37
m0rph3us Confirmed User Join Date: Mar 2001 Location: Principality of Sealand Posts: 2,033	Page 60 of that pdf.... 'a supply of a service made to a non-resident person is zero rated' however in the exclusions from the zero taxable provision they say: "a service of acting as an agent of the non resident person or of arranging for, procurring or soliciting orders for suppliers by or to the person." hmmm now even lower they say there are zero rated provisions for stuff excluded from them the general provision such as: a supply of advertising service made to a non resident person who is not registered. Looks to me like they are contradicting themselves. __________________ <font size="2" face="Tahoma"><a href="http://www.18blowjobs.com/webmasters/?640" target="_blank">Get paid $25 per signup</a> listing over <a href="http://galleries.18blowjobs.com/hosted.html" target="_blank">100 free hosted video galleries</a> - <a href="http://www.18blowjobs.com/webmasters/?640" target="_blank">Check it</a> » </font> Last edited by m0rph3us; 10-27-2002 at 03:18 PM..

10-27-2002, 03:18 PM	#38
CoolE Confirmed User Join Date: Jul 2002 Location: Canada Posts: 451	Interesting stuff above. I've been through two GST audits in the last 4 years. My first when all my income was as an affiliate. My accountant wrote a letter explaining how the income was all sales commission paid from US companies, and they were satisfied with that. The second was this last summer. My income for the tax year was now 95% from my own paysite, so the situation was different. This time the accountant explained in a letter how the members are CCBill's member's (and not really mine) as proven by the fact that I do not have access to their credit card numbers at any time and CCBill has primary control over the usernames and passwords, and therefore again the sales revenue is zero-rated. Again, they were satisfied with that. That's not to say that this is is the end of it. The accountant said that the GST tax code is somewhat vague in this area. But the info we supplied seemed to satisfy the particular auditor we had. Last edited by CoolE; 10-27-2002 at 03:22 PM..

10-27-2002, 05:59 PM	#41
Student Registered User Join Date: Oct 2002 Location: Ontario Canada Posts: 66	My dog is 13 years old I pay 7% tax on her food!! yet I pay 0% tax on my canned stew! Sometimes when the labels fall off I cant tell the difference __________________ Never Stop Learning ! Never Stop Making Money ! Click here to succeed Last edited by Student; 10-27-2002 at 06:00 PM..

10-27-2002, 07:39 PM	#43
L0stMind Confirmed User Join Date: Sep 2002 Location: Vancity Posts: 1,681	quiet - we recently filed for GST and made a claim for over $10k in refund (I didn't want to file it because I KNEW it would draw attention but the accountant made me file) and sure enough, I got a letter from GST asking me to explain my position. I called the contact number and spoke to the guy and he was pretty nice about it and said as long as I faxed or mailed in something letting him know why we asked for a refund (most of our clients are US based and we have recently purchased quite a bit of hardware for resale in Canada) We would recieve the refund shortly. And surprise, we actually received a check within a few weeks. However, when I called the same guy at GST again to thank him for the fast turn around in getting me the refund he basically told me I could expect a GST audit soon. My business # has been red flagged now or somesuch. So, I am now attempting to ensure I have all my ducks in a row and my arguments fully prepared. I REALLY would hate to have to pay over $140k in GST at once. Over two years worth of revenue from non Canadian sales. We have been paying GST on Canadian sales already - which is fine since Canadian revenue is such a small % of our incomes... and I feel that is the spirit of the whole GST tax anyways. But I am starting to get a little nervous. Your story is definitely not heartening. Thanks for the info BTW. Last edited by L0stMind; 10-27-2002 at 07:41 PM..

10-28-2002, 01:53 PM	#48
SleazyDream I'm here for SPORT Industry Role: Join Date: Jul 2001 Location: Phone # (401) 285-0696 Posts: 41,470	talked to my ca today about this - very detailed stuff. Canadians should take a good hard look at how they structure their business in regards to this issue. __________________ This dog, is dog, a dog, good dog, way dog, to dog, keep dog, an dog, idiot dog, busy dog, for dog, 20 dog, seconds dog! Now read without the word dog.

10-28-2002, 10:26 PM	#49
WiredGuy Pounding Googlebot Industry Role: Join Date: Aug 2002 Location: Canada Posts: 34,482	To Quiet> Just a thought, but wouldn't you be able to put something in the signup form such as Check this box if your a canadian citizen/resident checkbox? Seems that would be enough to filter out canadians to me. Just a thought, I imagine you've explored these options very thouroughly, but you never know... WG __________________ I play with Google.

10-29-2002, 12:23 AM	#50
m0rph3us Confirmed User Join Date: Mar 2001 Location: Principality of Sealand Posts: 2,033	ok, CCRA released the new guidelines for ecommerce in september. http://www.ccra-adrc.gc.ca/E/pub/gm/b-090/b-090-e.pdf Basically here is the jist of the 32 pages: For affiliates: if you get paid for advertising a company's sites/product and they aren't located in Canada or registered in Canada for a GST number, you are providing a zero-rated service. 0% GST, you can still claim tax credits. If you're canadian and use Canadian sponsors, you pay GST on the paychecks you get. For paysite owners: Tricky. According to that paper, if you sell membership to a website and allow users to view/access/download content that isn't your intellectualy property (trademark, patent copyright) then you have to charge/pay PST. From what I saw there, content that is your intellectual property then you are qualified for a 0% rating. It's usually when you do your own billing or have a merchant that you would would be under this braket. Now it can be argued that you provide a service to ibill ccbill, who are non residents/non registered businesses, to allow their customers to access your website in which case you would qualify to the advertising exclusion. It's IBILL that bills the customers and you get a % of the sales (85-89%). __________________ <font size="2" face="Tahoma"><a href="http://www.18blowjobs.com/webmasters/?640" target="_blank">Get paid $25 per signup</a> listing over <a href="http://galleries.18blowjobs.com/hosted.html" target="_blank">100 free hosted video galleries</a> - <a href="http://www.18blowjobs.com/webmasters/?640" target="_blank">Check it</a> » </font>