Canadian Court: Websites Must Collect Taxes From Nonresidents. WTF?
 

Damn, this could have a HUGE impact on Canadian webmasters! It's always been a bit of a gray area as to whether of not Canadian webmasters are required to collect GST on memberships from non-residents. If this precedent is set, it's surely going to put Canadian webmasters at a big disadvantage. I hope an appeal to the Supreme Court is pursued!

Another interesting note..

"?The Excise Tax Act does not provide an exemption for GST or HST for subscription fees for access to information on a server to Canada ? even when the subscriber is physically located outside of Canada,? she said."

..if the information is being hosted on a server "outside" of Canada, is it still subject to GST???

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OTTAWA, Canada ? A federal appeals court has ruled against adult entertainment website Dawn?s Place, saying that Canadian websites must collect a 6 percent goods and services tax on sales generated from nonresidents.

The decision came after Dawn?s Place appealed a tax assessment for failure to collect Canada?s 6 percent GST. A lower tax court ruled in favor of the adult website, but the company was unable to persuade the appellate court that site?s dealing in digital media ? Dawn?s Place sells picture and video downloads via a $19.95 monthly membership ? are exempt from collecting the tax.

con't

http://xbiz.com/news_piece.php?id=19414

In EU, all EU-paysites are required to collect VAT from EU-customers. But not from non-EU-customers.
Opposite all non-EU-paysites are required, not only to collect VAT and pay to the EU-customers country, but also to establish a company adress in one of the countries, if they want to sell to EU-customers.
Same rule goes for all digital services now, like selling hosting to EU-customers.

In general its not a loss, but money you do not have in the first way, if you stick to the laws :)

Yup, my accountant forwarded this to me last week. I'm curious to see how Canadian paysite operators are going to react to the loss in appellate court.
WG

Seems like it has to do with server location, and personally I think it kind of makes sense seeing as it is being served from Canada, at that point in time the member "visits" Canada and thus has to pay GST. Not a good thing but then again I can think of tons more tax rulings that make much less sense.

Canada = police state

I'm sure glad I don't run a paysite in Canada.

Been doing some reading though, and for anyone else that might be wondering, it looks like plain old affiliates are still safe, as long as the program you are promoting is not based in Canada.

Some good info here:

http://www.cra-arc.gc.ca/E/pub/gm/b-...-e.html#P22_93

Example:

A non-resident person who is not registered for GST/HST purposes pays a fee to a registered Canadian Web site owner to place banner ads for its business on the Web site.

The Canadian Web site owner is not required to collect the GST/HST on the fee, as the supply to the non-resident is an advertising service that is zero-rated under section 8 of Part V of Schedule VI.

:1orglaugh :1orglaugh

damn that is a nasty decision - there are many large, medium and small programs based in Canada, most incorporated in the EU or US additionally but that doesn't mean much to the taxman.

Yes, that's the kicker. With that wording it makes you wonder whether Canadian webmasters with servers physically located "outside" of Canada will be subject to paying the GST for non-Canadian subscribers. No Canadian "visit" would have taken place. -No doubt we'll learn soon.

Man...how do you separate and keep track of something like that. Especially when most paysite receive traffic/members from all over the world. wtf?

They are now saying you don't need to keep track of it, just charge everyone GST.

I heard of people before getting audited and having to show what country their subscribers were from, but now it seems they don't care. If you have a paysite in Canada you will charge everyone GST.

:(

I agree next thing yea know they are going to try invade Alaska

We gave power to Harper to do so, so we can have freedom ....

On the topic, this is nothing new, aside from the higher court decision.
The comparaison to a " visitor " spending taxes in the country is shacky, since that visitor, in the real world, can clame his taxes back at the airport if he produces both the invoices AND the goods.

Canadians having servers abroad wont be clear of collecting taxes, since they operate a canadian business; just like americans having an off-shore server doesn't liberate them from the laws of their country. :2 cents:

We fought this for years, 3 or so - it just ended and we won.

In AU you're supposed to collect GST if the person paying is an Australian resident or company. I haven't seen an official ruling but I have seen interpretations that say that using a third party processor doesn't exempt you from this requirement, even though it's located outside of Australia and charging in another currency!

As you can imagine, there are several technical hurdles to actually implementing this... at least a blanket "all must pay GST" ruling is a bit simpler. Canadian paysites will probably just have to absorb that cost, because adding an obvious GST charge or upping the price may result in a net loss of sales.

Since Canadian paysites will typically be billing in US dollars one question springs to mind: do you pay the govt 6% of your gross payout at the time it's converted to Canadian Dollars, or the Canadian Dollar equivalent of 6% of the USD amount at the time of the transaction?

We were one of the first companies for them to come after. I couldn't explain all the different directions they turned through the entire thing. At the end of it all, we could prove that Americans (or any other country) could purchase a membership from that country and could not fly into Canada and view porn, like wise Canadians couldn't view it outside of the Canada if it was purchased within Canada.

We do pay GST on some of the transactions, now. We fought it because they wanted a few million in back GST.

sorry to bump an older thread, but I am curious about the whole GST thing as it pertains to affiliates, and also how it pertains to programs like Adsense... how are you guys in Canada dealing with gst?

If you earn $100,000 as an example from adsense, are you supposed to have charged and therefore now be responsible to pay around $6000 gst on that on behalf of your customer (not like google would pay you the gst if you asked them?)

if your servers are hosted elsewhere, does that have any bearing on any decisions, or is it more the physical location of the actual customer (which would make more sense, but still a logistical nightmare to have to sort out)

i am taking a not of this... luckily my servers are not in canada

Wow I thought it was only the uk goverment that was making their wallets fat with tax on every bloody thing you do. not long now and we will be taxed to fart

I would be bankrupt :(

WTF? Isn't the government's decision illegal?

Only residents are charged GST. That's why they have the "GST Refund" booths setup in every airport in Canada. So when the rich Japanese visit Vancouver, they can get their 6% back.

are there any Canadian hosting companies that will be impacted by this? for instance what if I have a US based site hosted in Canadian, will I have to pay the tax?

They have always been required to collect the GST on those purchases, however, you submit it to the government and I believe they rebate you on those amounts... The best way to do it I suppose is simply to include the tax in the cost of the membership, and simply wait for that 6% back at the end of the year.

not exactly

I was thinking of the affiliate that gets a percent payout from the sponsor, he can't ask the sponsor for gst, so if he is required to collect gst on a sale he will be forced to bite the bullet and cough up the gst himself out of his payout

he doesn't get a rebate of it, he has to submit that gst as if he had collected it from the customer himself

Sorry, but nope. I don't know, maybe they changed the tax law in the past few years, but that was never the case before. I remember running an online operation from Canada, and both, my lawyers and the government told me that I only had to charge GST to residents.

The government even called me on it one time, and asked why my GST returns were so low compared to the income reported. I simply told them I run an online business, and the majority of sales are from outside of Canada. They were totally fine with that, because that's the law, and I was registered as a software company.

So either the law changed, or Dawn's Place pissed off the wrong person...

changes nothing ... your ass is in Canada....

no...GST/PST/HST are to be collected by companies operating in Canada ...
Servers location have nothing to do with it.

Picture a US company, selling to Canadians. To deliver the goods, they use Canada Post ( equivalent of the servers ). This doesn't make the service sold by a foreign company taxable...

And everyone is bitching that ONLY the US has problems with the online world??

I think the difference might be that when the US makes a mandate there seems to be an overblown expectation that the entire world must adhere to it. Whereas when the Canadian gov't creates one the expectation is for only Canadians to adhere to it, as we realize we don't own the entire interwebs. :D

expected post ....

The difference is that our problems are not of moral or religion value , like yours.

Taxes are everywhere, and gov's take for granted that you owe it to them. It is the burden lof the tax payer to prove otherwise.

Any different from the US ????

Doesn't affect affiliates. If you sign up to promote a US sponsor and make sales for them, you don't have to collect GST on your earnings from them.

This basically affects people with their own pay sites, charging money to people joining their site that is operated from Canada.

(However, I have heard that if you are earning money from an affiliate program based in Canada, then technically you should be collecting GST from them when you receive your affiliate check.)