Knowing the taxation basics on your on-demand app
If monies earned from the provision of services within your on-demand marketplace are considered a taxable supply under the Excise Tax Act and respective provincial tax regimes of British Columbia, Manitoba, Saskatchewan and Quebec, you need to take steps protect your sellers and yourself from potential tax liability by permitting them to collect excise taxes within your platform or advising them how to collect those taxes outside of it. Make sure you seek related legal advice and if necessary insert the appropriate language into your end user licence agreements.
When it comes to HST/GST, if a sellers income exceeds $30,000 your sellers have to register, collect and remit the applicable tax. When it comes to PST, things vary from province to province. Here is some information from provinces where PST applies to service providers apart from GST:
British Columbia
Businesses Required to Register – i.e. if they do the following in the ordinary course:
- Provide taxable services exceeding $10k a year
Unless they are a Small Seller:
- Located in BC, but no business premises and do not regularly make retail sales from established commercial premises
- Less than $10k gross revenue last 12 months & estimated less than $10k next 12 months
Taxable Goods
- All goods purchased or leased which are brought, sent or delivered to BC for use in BC
- Gifts of vehicles, boats and aircraft
- Software
Taxable Services
- Services to taxable goods – e.g. maintaining, assembling, repairing, restoring, dismantling and installing taxable goods
- short-term accommodation
- legal services
- telecommunication services, including internet services, and certain digital media
Exempt Goods & Ensuing Services
- Food for human consumption
- Vitamins and dietary supplements
- Used clothing/footwear under $100 per item
- Remembrance Day Poppies and Real Xmas Trees
- Energy Products
Manitoba
Businesses Required to Register for PST if they carry on business in Manitoba doing any of the following in ordinary course:
- Carrying on business in Manitoba selling taxable goods/services at retail
- Providing taxable services
Businesses are not required to register for PST if:
- Sell only non-taxable goods or services
- Annual sales volume of less than $10k if business buys all goods from registered sellers.
Taxable Goods
- All goods are taxable except those specifically exempted
Taxable Services
- Virtually any services to taxable goods – e.g. processing, assembling, installing, uninstalling, repairing, maintaining, inspecting, washing, polishing, painting, refiting , altering, adjusting, modifying, upholstering
- short-term accommodations
- Printing services
- Photography
- Accounting, architectural, legal, engineering, security and private investigation services
- telecommunication services in Manitoba
- Spa services
- Non-Medical skin and aesthetician services
- Hair Services, except haircuts under $50
- Body modification services including tattooing, piercing, tanning
Exempt Services
- Some services to Real Property
- Medical services other than hair augmentation and tattoo removal
- Daycare
- Education
- Advice or consulting
- Services to goods that are used outside Manitoba
- Coin operated car washes, laundry, dry cleaning
- vending machines that accept .25 or less
- pay phones charging .50 or less
- Repair of footwear
- Laboratory Testing
Saskatchewan
Businesses Required to Register for PST if they carry on business in Saskatchewan and do any of the following in ordinary course:
- Carry on business in Saskatchewan selling taxable goods/services at retail
- Provides taxable services
Business is not required to register for PST if:
- Annual sales are less than $10,000;
- The goods are produced and sold from their residence; and,
- PST is paid or self-assessed on the purchase price of equipment and supplies used in the production of those goods.
Taxable Services
- Computer services
- Credit reporting or collection services
- Dry cleaning or laundry services
- Extended warranties or maintenance contracts
- Most non-mainstream lodging for one month or more
- Lodging in motels, hotel, hostels, apartment houses, lodging houses
- Security or private investigation services
- Telephone answering services
- Veterinary services
- accounting services; advertising services; architectural services
- commercial building cleaning services;
- employment placement services;
- engineering services
- legal services
- Most construction services
- Telecommunications services
Quebec
Businesses must Register for QST if they carry on commercial activities in Quebec:
- Generally, a service is considered performed in Québec if, in the ordinary course of the supplier’s business, the supplier obtains an address of the purchaser that is in Québec.
- Taxi or limousine services must always register
- The supplier is not a Quebec resident, but charge for activities or events in Quebec
Business is not required to register for QST if:
Supplier is a small supplier whose total taxable supplies (including zero-rated supplies) made worldwide by the supplier – and associates – in the course of a given calendar quarter or in the four preceding calendar quarters does not exceed $30,000
Taxable Goods & Services
Generally all goods and services are taxable except those specifically exempted. Some examples include:
- tools sold to a business specialized in the repair of small motors, as well as lawnmowers sold by the business
- molds sold to a bakery, as well as chocolates sold by the bakery
- computers sold to a law firm, as well as legal services provided by the firm
- sales of new residential complexes
- sales and rentals of commercial buildings
- retail automobile sales and automobile rentals
- sales of gasoline and automobile repair services
- sales of soft drinks, candy and potato chips
- sales of clothing and footwear
- the rental of hotel accommodations for a night
- the provision of barber and hairstylist services
- sales of printed books that have an International Standard Book Number (ISBN), in the GST system only
Exempt Services
- the provision of most health, education, childcare and legal-aid services
- the provision of certain services by public sector bodies – e.g. government and public service
- the provision of most financial services.
Find out more about excise taxes in Canada
We advise On-Demand entrepreneurs to pay the websites of the Canada Revenue Agency and, also in the four provincial regimes where their platform delivers services in those provinces to ensure they’re in compliance. A person prepared for the coming of the taxman is a happy, protected person who won’t be dinged when filing time arrives. If you are still in doubt, consult a good accountant!
Finally, if your service providers have been a little lax in collecting and remitting tax, it’s not necessarily the end of the world. The CRA’s Voluntary Disclosure Program eliminates penalties (often onerous), but taxes and interest will still apply.
Forewarned is forearmed. Make sure your ducks are in a row when the taxman cometh.
