Are You Dodging Taxes with iTunes?

Let me say right up front that (a) I’m not an accountant, tax lawyer or employee of the CRA; and (b) confused. If any cares to set me straight on what follows, please do.

There’s been much talk lately of something called a “Netflix tax.” If you have a subscription to Netflix, you probably have noticed that it shows up on your credit card as a charge for $7.99. And like all goods and services purchased in this country, that includes GST or HST. Right?

Actually, it doesn’t. Because Netflix doesn’t have any employees, offices or assets in Canada, they say that they’re not required to register for PST/GST/HST nor do they have to charge those taxes to their customers. That’s their official position.

Great! So our Netflix subscriptions are tax-free, right? Um, no. There’s a technicality.

According to CRA rules, if a foreign business doesn’t charge sales tax, the responsibility falls on the Canadian taxpayer to keep track of their foreign purchases and then self-assess the taxes to be paid, which then must be reported and paid to the government. This applies to all Canadians who buy taxable goods and services online. That means your “tax-free” Netflix subscription should actually cost $9.03 ($7.99 + 1.04 HST) in places like Ontario. Ugh.

Okay, so maybe Netflix can slide by not having a physical presence in Canada. But what about Amazon? A lot of people buy Kindle books through Amazon.com, upon which no tax is charged. Don’t they have assets (employees, offices, etc.) in Canada? If so, shouldn’t those purchases be automatically taxed?

Which brings me to iTunes. When you buy a track for 99 cents or $1.29, none of that is tax. And Apple sure as hell has employees, offices and assets in Canada.

Uh-oh. Did I just poke a bear?

 

Alan Cross

is an internationally known broadcaster, interviewer, writer, consultant, blogger and speaker. In his 30+ years in the music business, Alan has interviewed the biggest names in rock, from David Bowie and U2 to Pearl Jam and the Foo Fighters. He’s also known as a musicologist and documentarian through programs like The Ongoing History of New Music.

2 thoughts on “Are You Dodging Taxes with iTunes?

  • August 11, 2015 at 3:16 pm
    Permalink

    If the customer is accessing a website that is hosted outside of Canada (servers, content, shopping cart), then the transaction is technically taking place between the Canadian customer and a foreign entity. So in your example of Amazon and Kindle, the Canadian customer is accessing the web store which is not hosted in Canada (presumably hosted in the US), the shopping cart in which they transact on is also in the US and the goods being delivered is coming from the US, then Amazon is not required to charge taxes because the transaction occurred outside of Canada.

    But as you say, just like if you go across the border and purchase something, technically, you have to declare the goods and taxes can be added to your foreign purchases.

    Reply

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