Applicable taxes gst / pst revenue canada (small based businesses)

[ovezevo]

After the recent court decision, rendering Revenue Canada triumphant over Ebay, many sellers have found themselves scrambling towards one of three practices.

1. They Sell less trying to stay under the radar from Ebay's responsibility to report personal information to Revenue Canada regarding Canadian citizens selling on Ebay. I'm not sure what the exact requirements are for Ebay forwarding the personal information nor do I know the level of activity that would warrant your information being passed onto Revenue Canada. Bottom line is that the government will not tolerate Canadians operating in a revenue making capacity and not reporting taxable revenue. THE GOVERNMENT WILL DO WHAT EVER THEY HAVE TO DO IN ORDER TO RECIEVE THEIR PORTION. THIS WILL MEAN MORE PERSONAL AND BUSINESS AUDITS. SO REMEMBER, IF YOU SELL SOMETHING THAT IS CLASSED AS TAXABLE AND YOU ARE NOT REGISTERED AS A BUSINESS, IT'S STILL YOUR RESPONSIBLY TO CLAIM THE TAXABLE AMOUNT AND REMIT IT.

2. They officially register as an operating business (small or home based). Once this happens, the owner has two options: How much do they estimate for gross sales in a calender reporting period? If the answer is 30,000 or less, they must register for a provincial sales tax number however, are exempt from applying for a GST number should they not want to collect and pay that tax. If gross sales are over 30,000 the owner must register for the PST AND GST number and collect accordingly.

3. They attempt to DISGUISE themselves by charging taxes ILLEGALLY when they shouldn't.

So, what does this mean for the community members? I'll do my best to break it down for Seller and Buyers.

SELLERS:

Regardless of which tax registration you have applied for,take the time to educate yourself on how to properly fulfill your requirements for PST and GST (CANADA). Some key highlights: GST(IF REGISTERED) will be charge on all sales regardless of buyer location (exception is OUT OF COUNTRY).

For PST:

1. The item must FIRST be taxable.... (ITEMS NOT TAXABLE are professional services, specific safety equipment, food and dietary supplements, good purchased for resale where the pst has been already paid, books and magazines, abrasives for business use and services provided to any exempt item.)

2. The item is being purchased within the province you operate in. (If a buyer resides in your province, then yes, you would charge the PST and also charge the PST on the shipping amount if it's not being picked up. VERY IMPORTANT! MANY SELLERS DO NOT KNOW THAT PST APPLIES TO THE FREIGHT CHARGE AND END UP ONLY CHARGING PST TO THE PURCHASE PRICE WHICH IS INCORRECT.

************* ANY ITEM PURCHASED OUT OF PROVINCE OR OUT OF COUNTRY IS PST EXEMPT *******************

YOU CAN ONLY CHARGE GST IF YOU ARE A BUSINESS REGISTERED TO COLLECT AND REMIT THE TAX, AND THE ITEM WAS PURCHASED WITHIN CANADA. IF THIS IS THE CASE, THE LAW REQUIRES YOU TO PROVIDE THE BUYER A RECEIPT FOR THE PURCHASE WHICH MUST HAVE GST NUMBER ON IT FOR ANY PURCHASE OVER $30.00

LASTLY, ANY PURCHASE WHERE THE BUYER IS NOT THE END USER, IS ALSO PST EXEMPT. MOST CASES, IT'S A REGISTERED BUSINESS BUYING TO RE-SELL.

SELLERS, REMEMBER TO ASK FOR THE BUYERS PST NUMBER IF THEY ADVISE YOU THAT THEIR PURCHASE IS PST EXEMPT.

BUYERS:

Expect to pay GST on all in country purchases from legal registered operating businesses. REMEMBER that all businesses are required by law to provide the buyer with a receipt for any purchase over $30 IF CHARGING GST. The receipt has to have the registered GST number on it. If they aren't providing it, SOMETHING IS UP!!!!!!

BUYERS ARE PROTECTED BY REVENUE CANADA FROM IMPROPER TAX CHARGES ON PURCHASES. IF YOU SUSPECT THAT YOU HAVE BEEN CHARGED GST IN ERROR, YOU CAN APPLY TO REVENUE CANADA TO HAVE IT RETURNED BY FILLING OUT FORM 189.

Always insist that any seller charging you GST taxes provides you with two very important pieces of information:

1. Legal Operating Business Name

2. The registered GST tax number.

Revenue Canada has a valuable service provided on their website which allows you to check the information provided in order to determine validity. Secondly, if a seller will not provide the information or you suspect them of falsely charging you GST taxes, you can claim for the taxes back from Revenue Canada by filling out a form 189.

ALL YOU NON REGISTERED SELLERS OUT THERE CHARGING BOGUS GST TAX, YOU MIGHT WANT TO THINK TWICE!!!

I SURE WOULDN'T WANT TO BE THE SUBJECT LISTED ON A FORM 189 KNOWING THAT REVENUE CANADA MIGHT BE KNOCKING AT YOUR DOOR WONDERING WHY YOU ARE IMPROPERLY CHARGING GST. I THINKS IT'S A GREAT WAY TO GET ONTO THE FAST TRACK FOR AN AUDIT.

BUYERS, NEVER PAY PST TAXES IF THE ITEM IS PURCHASED OUT OF PROVINCE AND BEING SHIPPED TO YOU!

OUT OF COUNTRY BUYERS SHOULD NEVER BE CHARGED ANY TAXES!!!!

ANY LEGITIMATE BUSINESS KNOWS THIS AND THEY KNOW NOT TO CHARGE THE TAX.

KNOW YOUR SELLER AND ASK ALL THE IMPORTANT QUESTIONS. IF YOU DON'T LOOK OUT FOR YOURSELF NO ONE WILL!

Next time you are looking at an auction, take the time to see if the seller charges taxes based on a tax table. If they do, take the time to check the customized table they have provided and make sure that you will be fairly assessed the proper taxes under the proper guidelines and situations.

[binarywhisper]

BUYERS, NEVER PAY PST TAXES IF THE ITEM IS PURCHASED OUT OF PROVINCE AND BEING SHIPPED TO YOU!

there is an exception to paying PST on out of province purchases. For example if a company located in BC sells something to someone in Ontario they will charge PST if that BC company has an registered working presence in Ontario.

On the subject of charging taxes you are not remitting. If they catch you, and it is likely they will sooner or later, they will destroy you. So many people seem to think they will just want the money. I can assure you they will hammer you into little pieces and completely enjoy themselves while they do it.

[ovezevo]

Entirely correct on PST. All buyers are exempt if item is purchased out of province and shipped to the buyer unless the company operates or has a presence in the province the buyer is from. GST on the other hand is still charged.

Just to clarify on the collection of taxes: If you are collecting taxes, it is your responsibility to forward those tax dollars to revenue canada. Schedules can vary from monthly,quarterly and yearly.

Finally, if you are ever caught, YES, you will be hammered by revenue canada.
Cheers

[JudesNiceThings]

Good Grief!!!

That is very complicated!!

[binarywhisper]

ovezevo it was good of you to post all that.

JudesNiceThings .. its not complicated, it just sounds like it is.
If you are making or are losing money then you should register a company.

Once registered you always collect GST if its ships to a Canadian address and never do if it doesn't. Just think of GST as a Federal tax.

You collect PST, (for 99.999% of the people on here) anytime the shipping address is the same province as you live in and never if it isn't. PST is generally only charged for tangible items, if you can poke with your finger you tax it. There are exceptions but not many and your book keeper should know them.

If you sell software, or anything produced on or by a computer it is a little weird and you should read up on it as many book keeps don't seem to know this. As a brief explanation though executable code is taxable vs interpreted code which isn't and the method of delivery can effect its taxable status.

For everything else you hire a quality book keeper and do what ever the heck he/she tells ya.

ovezevo, do you know what the rules are for people that live in provinces that have the harmonized taxes? I get the impression they charge for everything and remit it all and the gov splits it up for booze soaked holidays in Jamaica... or something like that.

[marschenegger]

Very informative post. In fact, I copied it and saved it to my hard drive in case I need this information at a later date and I cannot find this message thread (for one reason or another).

Having said that, I don't think the majority of Canadian sellers on this site make enough sales to be required to register as businesses and thus collect sales taxes. I'm not being flippant or derisive, just pointing out that this auction site tends to be much slower for sales, and anyway, the very first line of your post mentions FeeBay, so obviously this discussion did not originate here. Anyhow, of the few who DO make enough in sales, perhaps most of the business is to people in other countries. At least for me, I make the bulk of my sales to buyers outside Canada, and thus sales tax does not apply. It is at least as important to keep tabs on revenue from sales IN GENERAL as profits are subject to income tax.

Governments are indeed addicted to tax dollars, so much so that they tend to go after the honest people and nail them for the sins of the dishonest ones. Un-freaking-believable. It's like when a store affected by shoplifting and vandalism puts up the prices on merchandise to offset the costs. The honest people pay, and pay, and pay.

Mark

[islandbuckman]

I just retired from Rev Can. I was the bad guy who audited your books. In Canada, if you are a registered business, you are required to register for PST if you want to sell in the province. (Most provinces, check with your provincial gov.) If the sales you are doing are part of your registered biz you are required to collect pst on normally taxable new items that you are selling as used items and this is from your first $. Check with your provincial tax dept to be sure. Have you ever bought anything from a used store? You most likely paid GST and PST.
IE You sell used widgets as your biz, then you must charge PST (if the item normally attracts PST when sold as new)& GST (if registered for GST) to in-province sales. Out of province but still in Canada, you must charge GST (if registered). Out of Canada no tax is to be charged. Now if you sell widgets and sell, say a dingaling and the sale is part of your widget biz, then all of the rules above apply. If you sell the dingaling, as a private sale (Personal property, not purchased for resale)(Not as a part of or through your widget biz) then no tax is to be charged to anyone. BUT!! if you have 2 businesses, (NOT INCORPORATED) 1 selling widgets and one selling dingalings, and if your combined sales for both businesses is over 30 K then you are required to register for GST and charge GST. Also the $30K threshold is on Gross Sales Not Net income! Many people think they have to make 30 K profit to be required to register. But it is 30 K gross for all proprietorships that you run. IE say you own and operate 3 business !, 2 and 3. Biz 1 sells $15,000.00, Biz 2 sells $2,000.00 and Biz 3 sells $16,000.00 that equals $31,000.00. You are required to register and collect GST on future sales no matter that you only cleared $50.00. This applies to consecutive quarterly sales as well. If in 2008 you sold $29,000.00 in the last 3 quarters of the year (April to Dec) and in Jan 2009 you sold $1,001.00, then you are required to register as of the end of that quarter (April1) and that ain't no April fools joke!! It is quite complicated to the average person and even to some accountants. I have dealt with many accountants that did not know this rule. Also Rev Can can go back through your records and make you pay all the GST that you should have but did not collect including big penalties and huge interest! If you are coming anywhere near 30 K. GET A GOOD ACCOUNTANT!

[marschenegger]

TY Islandbuckman. I am anticipating a day when Revenue Canada will make the process much easier for collecting taxation. The income tax form would read something like this:
Enter your gross income on Line 1.
Submit payment for the amount on Line 1.