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sm5w2
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join:2004-10-13
St Thomas, ON

sm5w2

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CRA Reporting Requirements for Internet Business Activities

Just received the following newsletter from my accountant.

This is clearly intended to capture and tax economic activity generated by people selling stuff on ebay and kijiji.

For corporations who already file tax returns and who already report their incomes from all sources, this will just add unnecessarily to the cost of doing business in Canada while delivering no additional tax revenue to the CRA.

========================
New CRA Reporting Requirements for Internet Business Activities

For 2013 and subsequent taxation years, corporations will be required to disclose the income earned from any web pages or websites they administer. The percentage of the corporation’s gross revenue generated from the Internet must be reported on the recently released Schedule 88 for T2 Corporation Income Tax Returns.

The CRA identified several situations that may suggest a vendor earns income from web pages or websites:

The vendor sells goods and/or services on a website. The vendor may provide a “shopping cart” and process payment transactions, or use a third-party service to process transactions
Customers call, complete and submit a form or email the vendor to make purchases, orders, bookings, etc.

The vendor sells goods and/or services on auction, marketplace or similar websites operated by others

The vendor earns income from advertising, income programs or traffic that a site generates. For example - static advertisements placed on the site for other businesses; advertising programs such as Google AdSense or Microsoft adCenter.

The CRA also noted that taxpayers are required to file Schedule 88 if they have created a profile or other page describing their business on blogs, auction sites, online marketplaces or any other web-based portal or directory that generates income.

The form requires corporations to indicate the number of websites that generate income, provide the addresses of the top five websites that generate revenue for the business and list the percentage of gross revenue generated from Internet activities.

This information must be tracked on an ongoing basis to comply with these requirements.

Currently, Schedule 88 is not available with commercial corporate tax preparation software. It is unclear whether the CRA will require corporations to paper file this form separately, since it is not available for electronic filing. It is also not yet clear whether corporations that have already filed their 2013 returns will be required to go back and complete this schedule.

There is an identical reporting requirement for individuals on the T2125 Statement of Business or Professional Activities schedule that is part of the 2013 T1 Income Tax and Benefit Returns. This requirement is part of the current T2125 form and should be completed when filing 2013 T1 Income Tax and Benefit Returns.

These new reporting requirements appear to be very broad in their application. We are hopeful that the CRA will provide further guidance as to how they may affect taxpayers.
resa1983
Premium Member
join:2008-03-10
North York, ON

resa1983

Premium Member

Click for full size
Yeah.. Its a pain.

The above is how it looks in Taxprep (Professional Software), in T2125.

HiVolt
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join:2000-12-28
Toronto, ON

HiVolt to sm5w2

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to sm5w2
Yea good luck with companies reporting that stuff... especially small ones.

sm5w2
Premium Member
join:2004-10-13
St Thomas, ON

sm5w2

Premium Member

Why wouldn't some consortium of internet companies and providers be fighting these CRA reporting requirments?

When yellow-page advertising came out, did the CRA (or Rev-Canada) make it a requirement to report the business revenues derived from those ads?

Same question can be asked of fax-machine-facilitated sales. Or radio, or TV commercials, or bill boards, or newspaper or magazine advertizing.

How can CRA make these changes to the tax code - without new legislation from parliament?

dillyhammer
START me up
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join:2010-01-09
Scarborough, ON

dillyhammer

Premium Member

said by sm5w2:

Why wouldn't some consortium of internet companies and providers be fighting these CRA reporting requirments?

Fight the CRA? Man. You're making me nervous just talking like that. Remind me to NEVER hang out with you. Ever.
said by sm5w2:

How can CRA make these changes to the tax code - without new legislation from parliament?

The income tax act provides that the CRA may make regulations. It's up to you, the participant in this glorious "voluntary taxation system", to comply with or challenge those regulations.

Enjoy.

Mike
Gami00
join:2010-03-11
Mississauga, ON

Gami00 to sm5w2

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to sm5w2
said by sm5w2:

When yellow-page advertising came out, did the CRA (or Rev-Canada) make it a requirement to report the business revenues derived from those ads?

all of your ad examples are all paid for.. as in, you paid the broadcaster/newspaper a spot on their medium to display your info.
this hasn't changed, ever. that's why you have companies pay 2 to 10 million for a 30 to 60 second slot for Super Bowl commercials.

the new rules don't affect this old method's taxation. As verdor A is buying a service from company B to showcase their product. That's just a service company B sells and will report any taxes/transactions as required of any business.

what the new CRA rules are for websites and youtube content creators/streamers. They're not getting money from the Product vendor of what ever ad is running in their website. They're instead getting paid by the Ad service group (in this case, google ads service or apples i-ad thingie.

Also from my understanding, Google with their ad system already send out tax forms/statements for the amount they pay out to their streamers or people using youtube services, so that they can file their taxes properly (for americans at least.)


Teddy Boom
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Toronto, ON

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to sm5w2
I wouldn't mind this at all, except I have NO IDEA how to fill it out. Like, when I make money from providing internet service to people.. That is advertised on a webpage, so is that income generated from that webpage?

I get the need to capture affiliate marketing and youtube ad revenue and stuff, but... They need to tighten up the questions so that the answers become more clear.

sm5w2
Premium Member
join:2004-10-13
St Thomas, ON

sm5w2 to Gami00

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to Gami00
> What the new CRA rules are for websites and youtube
> content creators/streamers.

It's worse than that:

=================
The CRA identified several situations that may suggest a vendor earns income from web pages or websites:

Customers call, complete and submit a form *or email the vendor* to make purchases, orders, bookings, etc.
=================

If any company receives a purchase order via email (which we do, usually in the form of a pdf) then the CRA now classifies that as an "Internet Business Activity" which we now have to track somehow.

But if we receive THE SAME PO on our fax, or via postal mail (which we also do) then those apparently don't count as "Internet Business Activity" - even though we would have had a lengthly e-mail discussion with the customer leading up to getting those PO's.

What justification does the CRA have for making such a distinction in HOW a vendor conducts business such that it must now be reported on tax forms?

> What the new CRA rules are for websites and youtube
> content creators/streamers.

Given how things work currently between retailers/vendors, advertisers, ad-servers (like google), explain how the revenues exchanged by these business entities are not being captured as business income expenses to the extent that their respective tax returns accurately indicate how CRA should tax them.

Why is the CRA asking for this new level of detail? Is there somewhere in that ecosystem where income is not being reported for tax purposes?

Kaloni
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join:2006-02-21
canada

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Schedule 88 also appears to be in place on TurboTax Online as well.

sm5w2
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join:2004-10-13
St Thomas, ON

sm5w2

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> Schedule 88 also appears to be in place on TurboTax Online as well.

That's not the point.

Having to tell the CRA we have a website and conduct business using email makes as much sense as having to report if we were drinking coffee (regular vs decaff) when we closed the sale.

El Quintron
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Tronna

El Quintron

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said by sm5w2:

Having to tell the CRA we have a website and conduct business using email makes as much sense as having to report if we were drinking coffee (regular vs decaff) when we closed the sale.

Wut?

You are required to report income and capital gains, irrespective of whether it's made on the internet or not. So irrespective of whether you chose to sell your widgets on Kijiji, Ebay, or in newspaper classifieds, you're still going to have to declare it in some form.

You should obviously be shooting for the lowest tax burden possible, but irrespective of how the money is made, the government wants a cut.

EQ

sm5w2
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join:2004-10-13
St Thomas, ON

sm5w2

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> Wut?

The CRA is adding new filing requirements such that a business must now report various details in how it uses the internet to conduct business, and (I think) how much of it's revenue is derived from such sources.

Do you not see how onerous these new requirement are in terms of operating a business in Canada?

Do you not see how useless these new requirements are in terms of the CRA somehow capturing any hypothetical unreported income?

El Quintron
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El Quintron

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said by sm5w2:

Do you not see how onerous these new requirement are in terms of operating a business in Canada?

If you tell the government I sold x widgets for y dollars, and I paid z dollars for them, the government isn't going to care either way.

What they're looking for here is people who buy and sell stuff on Kijiji/Ebay and are probably turning over non-negligible profits. Possibly trying to scoop up crypto miners as well, as again there are non negligible monies there as well.

FWIW: You don't have to reveal your business minutiae to the government but you do have to declare *all* income you make.

There is no getting around this, anyone who has investment income, or has done contract work will probably recall the government sending you a letter informing you about the T3 or T4A you forgot to report, and how they're going to adjust your return accordingly.

sm5w2
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St Thomas, ON

sm5w2

Premium Member

> FWIW: You don't have to reveal your business minutiae to the
> government but you do have to declare *all* income you make.

Did you read all of my posts in this thread?

Doesn't reporting how much of a company's income is due to or facilitated by their internet connection constitute "business minutiae" ?

El Quintron
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El Quintron

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said by sm5w2:

Doesn't reporting how much of a company's income is due to or facilitated by their internet connection constitute "business minutiae" ?

What is it about income is taxable do you not get?

sm5w2
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join:2004-10-13
St Thomas, ON

1 recommendation

sm5w2

Premium Member

> > Doesn't reporting how much of a company's income is due to
> > or facilitated by their internet connection constitute "business minutiae" ?
>
> What is it about income is taxable do you not get?

Why do you insist on interpreting my argument as some sort of tax dodge?

Do you think that companies that receive PO's (purchase orders) via email treat them differently than if the PO came off the fax machine, such that they keep the email PO off the books and don't report it? Even when the cheque comes in and they deposit it in their business bank account at a Canadian bank?

Why does CRA want to know how much of our business is transacted or facilitated by email, WHEN WE ALREADY REPORT ALL INCOME REGARDLESS WHAT EQUIPMENT OR TECHNOLOGY WAS USED TO FACILITATE THE SALE!

Regardless if we use phone, fax, email or carrier pidgeon,

Regardless if we have our own web site, or fecebook page, or a yellow-pages ad, or a radio or TV commercial, bill board, or a hot air balloon with our logo on it,

A sale is a sale and the income all goes into the same bank account and gets reported to CRA.

Why the CRA all-of-a-sudden wants all Canadian businesses with any sort of web-presence or something as trivial as an email address to now report what fraction of their income that they ALREADY REPORT can be somehow traced to the internet - I have no idea. Unless they want to impose some sort of "special" internet tax on that part of the income.

TwiztedZero
Nine Zero Burp Nine Six
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TwiztedZero

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This would make for a good post on /r/Canada just to see how much karma it gets you.

El Quintron
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El Quintron to sm5w2

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said by sm5w2:

Why do you insist on interpreting my argument as some sort of tax dodge?

I've made no such allegation; thus far it seems like a tempest in a teapot:

»www.ctf.ca/ctfweb/EN/New ··· 111.aspx
quote:
A New Schedule for the T2 for 2013: Internet Business Activities

A corporation is now required to file the one-page schedule 88, "Internet Business Activities," with the T2 return if it earns income from one or more web pages or websites. The schedule is applicable to the 2013 and subsequent taxation years, so even taxpayers that have already filed their returns are required to comply. This new schedule was apparently posted on the CRA website in early December, and it is not yet included in the commonly used Taxprep tax return preparation software. While the disclosure requirements of schedule 88 may not be very onerous, depending on a corporation's specific business use of the Internet, its application is broad, its rationale is uncertain, and its specific disclosure requirements are unclear.

Now if I'm understanding this correctly the requirement is only for corporations, an entity which owes substantially more than a private business to the government due to its preferential tax treatment, and mitigated risk structure.
El Quintron

El Quintron to TwiztedZero

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to TwiztedZero
said by TwiztedZero:

This would make for a good post on /r/Canada just to see how much karma it gets you.

Me and my downvote army will be watching Reddit very carefully for any developments. The hivemind will reward you generously should your tip produce solid evidence.

sm5w2
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St Thomas, ON

sm5w2

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> Me and my downvote army will be watching Reddit very
> carefully for any developments.

Well you watch all you want - I have this entry in my hosts file:

127.0.0.0 reddit.com

That should tell you something.

El Quintron
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El Quintron

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Looks like that went straight over your head.

sm5w2
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St Thomas, ON

sm5w2

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> Looks like that went straight over your head.

Is there a reason to be nasty over this? Do you want to explain how reddit is relevant to this thread - before it gets locked?

El Quintron
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El Quintron to sm5w2

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to sm5w2
You may also want to add:

infowars.com/

and

prisonplanet.com/
El Quintron

El Quintron to sm5w2

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to sm5w2
said by sm5w2:

Do you want to explain how reddit is relevant to this thread - before it gets locked?

I was replying to TwiztedZero See Profile, hopefully he caught the joke.

sm5w2
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St Thomas, ON

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Thanks for driving this thread into the ditch.

El Quintron
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El Quintron

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said by sm5w2:

Thanks for driving this thread into the ditch.

How so?

I questioned the validity of your claims as far as the reporting requirements were concerned, I then proceeded to research the matter on my own (you're welcome) and determined that the requirement was for corporations only (at least at first glance) and now you feel that the thread is invalidated. What's up with that?

TwiztedZero
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Toronto, ON

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said by sm5w2:

Well you watch all you want - I have this entry in my hosts file:

127.0.0.0 reddit.com

That should tell you something.

That just tells me you're a tin-hatter with a degree in paranoia.

BACONATOR26
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join:2000-11-25
Nepean, ON

BACONATOR26

Premium Member

said by TwiztedZero:

said by sm5w2:

Well you watch all you want - I have this entry in my hosts file:

127.0.0.0 reddit.com

That should tell you something.

That just tells me you're a tin-hatter with a degree in paranoia.

Safe to say he doesn't have a degree in Catology.

El Quintron
Cancel Culture Ambassador
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join:2008-04-28
Tronna

El Quintron

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said by BACONATOR26:

said by TwiztedZero:

said by sm5w2:

Well you watch all you want - I have this entry in my hosts file:

127.0.0.0 reddit.com

That should tell you something.

That just tells me you're a tin-hatter with a degree in paranoia.

Safe to say he doesn't have a degree in Catology.

Methinks those with degrees in Catology are better company on internet forums.


milnoc
join:2001-03-05
Ottawa

milnoc to sm5w2

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The CRA is simply going after people who earn a living over Internet sales and have never reported the income. Essentially, they're going after legitimate tax cheats.

As far as the new Schedule 88 is concerned, my accountant will deal with that. I just need to give him the URLs, and he can look up the sales amounts in my books as he always does. They're already a separate income item in QuickBooks.

Estimated time that will be spent on this each and every year: 1 minute.