Canadian Paysite Owners GST question
 

I just got off the phone with GST, which they were suggesting that memberships with my paysites were subject to GST, despite the fact that 90% + of the members are not Canadian citizens, the servers are not located in Canada, and the billing is handled via a 3rd party processor.

Anyone have any experience with GST on this. If I write to them, they said it may taker months to get a ruling :(

sounds a little fishy to me, but I am interested in what some of the other canadian paysite owners have had in their dealings with GST

I'm under investigation for similiar reasons. The problem is they are stupid as hell and don't understand the concept of sponsors and 3rd party billing. I'm only making money from sponsors and not even selling memberships and they want to tax the $40/signup I earn. Considering the revenue is never earned in Canada, I am contesting their BS.

If you operate a paysite and you have Canadian surfers, then the GST office is correct and you do need to collect taxes on those people. If your 3rd party processor can't support that, guess what, you gotta take 7% out of your profits and give it to the big bad GST office.

Get this too, if you have a Canadian GST account (likely one will be issued to you if you don't have one already) then any revenue you earn from Canadian sponsors you gotta take 7% for GST.

Complete BS to me, so my solution was to say fuck you to the GST office and ban doing business with canadian sponsors. Talk about stupid, they are encouraging me to not do business with Canadians.

WG

Yeah I heard about the 7% if I earn income from Canadian sponsors, which I have very tiny amount of $$

It is dumb though, and simply encourages people to register offshore companies, and not pay tax in Canada at all, mind you the big Canadian banks already do this

I am downloading a massive document right now, I guees that I have some reading to do... lol

Best way to contest it I found is simply say you don't know who your clients are. Your 3rd party processor does and you have no way to gather this information (this is true in my case since I get paid by sponsors and I really don't know who they are). And by the way, when they finally release any funds they may be withholding, you'd be surprised how much interest they give out as compensation. So good for them that they're stupid, my money is earning interest at better than bank rates :-)

WG

I hate GST

I don't mind the GST at all, I mind the idiots who can't understand that they don't have a right to collect it on US revenues.

Besides, there's some cool shit you can do with a GST account. Like if the amount of GST you spend in Canada exceeds the amount of GST you collect from Canadian companies, the government will give you the difference back to you.

Talk about sweet huh!
WG

We have the same problem.
We hired a tax laywer, he's working on it.
--
Greedy Government !!!
ahh..

I bring back this old thread because I wanted to know if you had had any news from your tax lawyer. I would be interested to see what he has to say about that. Of course, it might all change with the new visa rules, but still would be a good thing to know:)

Please let me know if you have any infos on this.

Dont know if this helps,

We have the GST in Australia also, though it may be different,

My accountant said that paysite sales would be classed as export sales and therfore not taxable.
Adding weight to the arguement is the fact that hosting and billing is done offshore.

in short, you're fucked.

i was gst audited about 18 months ago. very ugly. we argued that gst shouldn't be applicable to our members (95% of which are not Canadian). no dice. then we worked out a way to block all Canadian signups - they decided that it didn't matter - we still had to pay gst. period.

oh, they also forced us to pay retroactive gst for the 2 years previous as well.

quite a chunk of change. fun stuff.

Hmmm, quiet - that is fucked.

I am having some troubles with GST right now, but we have client info that shows our clients are not canadian.

the auditors perception so far is we wont have to pay GST on those sales...

I hope I dont get stuck in your situation - nasty.

yes, i'm still pissed over it. it makes me sick - i owe over $24,000 for August alone. it went to the gst 'board' or whatever (above our auditor's head) - and the answer was no. pay gst. we are not interested in solutions or interpretation :glugglug

I do not enjoy dealing with GST people. In their defence I guess they are jaded because no one wants to pay GST. However, they are having a hard time understanding even HOW we do business using the internet...

I dont mind paying GST for our canadian clients - it's the law and I'll do it. But pay for the non canadian clients? hmm, I am gonna have to fight that if it comes to it.

we looked at fighting, but it would have red flagged us for full audits. something i wanted to avoid. once i've exited the adult biz, i'm going to get a large firm to take the case - for a percentage of recovery.

In your situation, I quite possibly would do the same thing.

As we plan to be around for sometime longer (thats the plan at least) I am going to have to figure this out now.

Our records are clean enough to withstand a full blown audit, but that will definitely suck if it comes to that.

We got flagged already because we have a refund for 3 periods straight... and the refunds keep increasing - our last refund request was 2x as large as the previous (we are in the midst of buying a bunch of hardware locally)... and now they are all over us... not fun.

All I have been told is that I have to pay whatever they decide upfront and fight for the money back later. Sounds backwards to me....

good luck bro. audits are most definitely not fun - and that's speaking from the point of view of having perfect books.

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.

actually, it stands for goods and services tax

yes, this happened to us. 2 years retroactive, plus all current and future earnings (as i posted above).

that good ole gouge and screw tax
being in alberta and a tax free province till they implemented the
gst, to top it off it was only supposed to be a temperary tax, yeah right just like our personal taxes were to help fund the war.

Thanks for the insight guys. I am gonna have to go over this with my accountants. They were of the view that we would not have to pay GST on sales to our non Canadian clients.

I have an accounting background, I am fairly certain my bookkeeping is fine. I am sure it will stand up to an audit (question is, will my memory?)...

I really would hate to pay an extra 7% on my past sales (2 years of decent profits - less then 5% canadian based, ugh)..

Ok, I'm operating as a sole proprietorship at the moment, I've recently started making a lot of money, both from affiliates and form some commission work that I'm doing. Nothing for anyone based in Canada though. I know it's going to be over the 30k mark in total income, does this mean that I'm going to have to pay an additional 7% gst on top of the normal income taxes?

GST is based on sales... slightly different then income tax which is based on net profit.

Yes smith you will have to pay an extra 7% on the 30k. It's any and all money that you earned that was not from a shipped or packaged product.

Let me try to get this right. Any money we ever earn in any way that comes from another place than canada, we have to simply send 7% of it to the government for GST? Even money collected from sponsors and stuff like that? I'm not talking about the money you make with you own paysite here...

Also, I just don't see why the government is asking us to charge GST to non-canadian resident? Of course, we don't charge them, we just take 7% off from our check and send it their way, but that simply doesn't make sense. I'm pretty sure there's gotta be a ruling somewhere related to that where a company won its case against the government in such a situation.

Quiet: you say there is nothing you could do against that? So you are sending 7% of all your revenues every month to the GST? That sucks damn bad man! Can't understand why they do that. As if we were not already overtaxed up here.

*sigh* yes. of course it's not fair and doesn't make sense, but so what?

yes, 7% (around $25000 a month) goes to GST. period. no way around it. oh yeah, and 2 years retroactive at the time of the ruling. brutal.

they do it because they're greedy i assume. when have you ever known the government to go easy on you about taxes. i've never seen it.

like i said, once i'm out of the biz, i'm going to make it my hobby to argue this thing, and try to recoup a percentage of the huge amount of money i've paid out to gst.

honestly, i don't like talking about it - one of the few things that SERIOUSLY FUCKING PISSES me off.

wow... i had no idea about this shit regarding the gst.

i always assumed(NEVER ASSUME, i know) that since everything was hosted/produced out of the country that the GST did not apply.

Quiet, i still think you have a winnable case but you might have to take it all the way up the higher courts. sucks big time....

almost sounds likes it worthwhile getting a US presence shit.

what's all happening with you guys regarding the new VISA rules anyway?

For the money.... Ever tried getting a subvention toug???

It is pay only situation.

Mortimer,

I think that quiet either misunderstood your entire question, or I believe that he is wrong.

If you are selling a product or service AND COLLECT THE REVENUES, than yes you must pay the GST.

However, I believe (although I may be wrong), that if you are simply promoting a sponsor and not actually collecting the money, the sponsor cheques you receive are simply your commission and not subject to the GST.

Any information on this would be appreciated by some apparently.

Those of you in the U.S. think you have it bad? I hear the IRS were forced to change their militant attitudes towards tax collecting. Up here it's still alive and well.

uh, i was at no time talking about pushing a sponsor. i'm talking about operating a paysite. completely different.

this has nothing to do with me being right or wrong, it has to do with the gst audit board's judgement with regard to my company.

read the first post in this thread.

just saw this. i have no idea - as all my income is generated with my own paysites.

anyway, talk to a tax lawyer if you are concerned :glugglug

My 2 cents...About 3 months ago I cancelled my GST business number with Revenue Canada. I explained to them that all of the revenue was in the form of commissions from U.S. based companies, via the internet. RevCan did not contest my request for cancellation and processed the request almost immediately.

I am guessing, but I believe that when you are simply being paid sign-up fees from U.S. based sponsors, and not running your own pay site, this is the same as any type of commission income...which is taxable but not subject to GST.

When I file this year's tax return, I guess that will be the true test.

Quiet, why don't you go offshore?

I mean, if you pay 25k per month of tax, open a corporation on Caiman Isles and run your paysites under that compagny. You can still get your checks in Canada... no GST, no tax... zero.

4-5k per year for a good offshore business is better than giving away 300k per year to some stupid gouverment who can't even manage the fucking tax and rent 1000$/night hotel rooms.

...uhm you'd have to pay tax on that. Canada law forces you to report worldwide income. Even if you don't report your offshore business ... you can't appear as $0 income in Canada. And once you start bringing in cash from your offshore, the gov will catch on.


I do hear however that there's an international tax law that states, if you live less than 180 days in a country you don't have to pay tax to that country. ? something along those lines.. my friend says boris becker does it in germany & monaco.

I heard that if you have an offshore corporation and pay tax there... Canada can't not double tax you on the same incomes.

Basically, if you run your business in Bahamas and pay 0% tax there, you can not be "double" taxed again here if you wire all the money to your canadian bank. Your corporation is not canadian, so it's not international incomes.

Anyway, an offshore corporation would save you from the 7% GST tax, at least.

I'm going to get a corporation in Caiman Isles and wire all the money to a Swiss Bank. I'll still get some money from advertising to my canadian corporation and pay 20-30k of tax per year in Canada... I think it's enough and honest ;-)

Current the status of our GST issue:

At the moment, Revenue Canada has indicated that are website is considered to be Intellectual Property, but is not considered to be Copyright, so it doesn't follow the 0 rated tax for customers that are not Canadian based. Of course, we are going to be appealing this desicion and will keep you informed.

Can you believe it - our content is not considered copyright!! We create our own content, it isn't purchased, licensed, or affliate banners or promotion, it is ours and they think that it isn't protected by copyright!

Dawn

why not ship a letter to all customers with some sort of information on it. Then you are selling them the info, and the website is just another way to access it.

Hence you are selling a packaged product internationally and do not need to pay.