I know what you’re saying – 2 posts in 3 days? Is Allen ill? It’s possible. But my physical and / or mental state notwithstanding, this is juicy and I had to write about it.
So yesterday there was a bill introduced in the National Assembly in Quebec City. Bill 997 to be exact. Here’s the text of the bill in PDF, but you don’t have to open that because I am going to give you the juiciest parts. And they are juicy! Let’s start with the title of the bill:
An Act to regulate e-commerce and ensure tax fairness for traditional and local businesses
Classic political tactic – name the bill to put the positive spin on it (tax fairness!) instead of the controversy it’s going to cause. So what does this bill do? Let’s go to the explanatory notes of the bill, because it’s got some ‘splaining to do:
This bill amends various legislative provisions concerning income tax and sales tax collection in order to regulate e-commerce and ensure tax fairness for traditional and local businesses.
Yeah yeah we got that fairness part already. What’s really going on?
The bill amends the Taxation Act so that persons who are not physically present in Québec, but whose online presence is significant, are considered to have an establishment in Québec.
You might think that it’s not important to “have an establishment”, but holy fuck is it. What does it mean to have an “establishment” in Quebec? It means that you have to pay Quebec taxes. So pay attention here – this bill sets out to make people who have no physical presence here pay Quebec taxes. Oy. People are already taking measures to ensure that their websites are safe to use, preventing fraud and other risky situations with the help of https://sift.com/ and other services, so why does Quebec want to bring another factor into play for those online?
Even if you are not here, if your “online presence is significant” in Quebec, you will be subject to Quebec taxes. What does it mean to have a significant online presence? I’m glad you asked!
a person is deemed to have a significant online presence if he or she makes a significant number of sales or service contracts with persons residing in Québec, if a significant number of persons visit the website, from locations in Québec, via which he or she sells goods or services, if a significant number of payments are made to him or her by persons located in Québec for the supply of goods or services, or if he or she collects and uses data of a personal nature from persons residing in Québec.
And what are those significant “numbers” (of sales, or website visits, or payments)? Hell if I know. The bill doesn’t go that far. But note that last bolded part. It doesn’t even say “significant”! It just says anyone who collects and uses data! That’s everyone!
So a significant online presence means you will be subject to the Taxation Act, meaning you have to pay Quebec income taxes. This is going to need a tax lawyer to help sort for those businesses affected. Now you, my dear reader, are not running an e-commerce site or some other site that takes $ from Quebecers that you would need to pay income tax on your profits. Maybe you are just an average Quebecer, going about your daily life in a cubicle, and don’t care. Ha! Well I’ve got news for you:
The Act respecting the Québec sales tax is amended so that persons with a significant online presence are required to collect the Québec sales tax. To that end, the bill broadens the definition of “establishment” to include the notion of a significant online presence via a website through which sales and service contracts are made or data is collected
Well now you are paying attention. Anyone outside of the province who has that “significant presence” on the web in Quebec will have to charge you Quebec Sales Tax (QST) on their sales. The QST is currently 9.975%. Ouch! If you in Canada and are in need of legal assistance when it comes to organizing your taxes, you may want to check out this website – https://www.canadiantaxamnesty.ca/.
We are still reading the explanatory notes! We haven’t even gotten to the actual bill yet. Let’s go to the preamble, which is a more official type of explanatory note:
AS businesses with no physical presence in the province of Québec circumvent the sales tax and income tax collection mechanism, a practice which contributes to erosion of Québec’s tax base;
Uh, no, they are not “circumventing”, that’s the way the law works! You are not here in Quebec, you don’t pay Quebec taxes! Let’s go on:
AS, when Québec consumers purchase goods or services online from a supplier or provider located outside the province of Québec or outside Canada, no sales tax and income tax collection mechanism applies to the supplier or provider or allows the Government to receive the amounts to which it is entitled by law;
Well that’s true, no mechanism applies. The “amounts to which it is entitled” however? Hmmm.
So the actual body of the bill is just some technical stuff that would put into force everything I have explained so far. Some juicy tidbits, though, in handy bullet point form:
- Payment processors will be required to tell the Quebec government about sales made to Quebecers if the government asks nicely. If they don’t comply, 30% penalty!
- If you try and hide that you are making sales in Quebec, you will be subject to a 50% to 200% penalty;
- If you are a company and don’t register to pay taxes in Quebec like you are supposed to, the payment processors will have to do it on your behalf.
This will all turn out well :-p
Superterriffic Happy Hour Analysis Time
Look, income taxes and QST are obviously huge sources of funds for the government. Most of the sources in fact! So this would be a boon to the government. Let’s look at some other important facts here:
- This bill was not introduced by the government. It was introduced by Amir Khadir of Québec Solidaire, a party that has 3 seats in the National Assembly;
- With that said, according to this article, the government is aware of the problem and “that the non-taxation of certain goods and services sold online is unacceptable”;
- According to this, the bill is supported by Peter Simons of Simons department stores, who stood beside Mr. Khadir yesterday. Of course local Quebec businesses would support this. This article says that the bill is also supported by the Conseil québécois du commerce de détail, which is the organization representing Quebec retailers;
- According to the TVA article linked above, Québec Solidaire wants this passed before the holidays. HAHAHAHAHAHA. Do you not know how government works? No wonder you have 3 seats.
OK back to reality here. What bothers me about the reporting I have seen so far is that everyone says this is targeted to “big retailers”, which is good politics. Several articles talk about the fact you have to sell $30,000 annually to have to charge sales taxes on the internet. That is technically true, in that the general rule for everyone is that if you don’t have sales of $30,000 in a year, you don’t have to charge sales tax. That applies to me! I bill more than that in a year, so I have to charge sales tax to my clients. Do I look like a big retailer to you? No. $30k annual sales in Quebec is nothing. Doesn’t even pay for one employee! A “significant presence” or “collects and uses data of a personal nature”? That’s everyone, not just big retailers.
I have not even begun to talk about the administrative nightmare this would be.
I have not even begun to talk about how many companies might just say “we won’t sell in Quebec”.
I have not even begun to point out the fact that sometimes, you are not even buying directly from the website you are buying from – the website is just a marketplace facilitating small merchants.
I have not even begun to point out that forcing payment processors to release information about the sales of their customers is a violation of privacy law and contract law.
Don’t get me wrong, I see the logic in this. I see the politics in this. I feel for local physical retailers. But this would be a nightmare for people selling on the internet and people buying on the internet. You may want to go shopping at Amazon while you can.
All of this tax talk can be confusing. It’s easy to get muddled with how to handle your taxes and how to sort any trouble you might find yourself in due to taxation reasons. If you’re located in Canda, tax lawyers like goodservicetax.com are able to help with your issues. There’s no need to struggle alone, especially with the new tax legislation put in place in Quebec!