Deprecated: mysql_connect(): The mysql extension is deprecated and will be removed in the future: use mysqli or PDO instead in /home/a26f9f83/public_html/articles/includes/config.php on line 159
Alas! In E-Commerce Taxland > NetSparsh - Viral Content you Love & Share

Alas! In E-Commerce Taxland

In trying to comply with tax laws for your e-business, you may find yourself falling down the rabbit-hole, going through the looking glass, and attending a Mad Tea-Party.

Common sense, logic, and fairness never did apply fully to the field of taxation but this is especially true of e-commerce transactions.

1. Canada Customs Welcomes You to Canada!

Since I`m located in Canada, let`s start here.

Canada has what you might call a national sales tax or a value added tax (VAT). This Goods and Services Tax (G.S.T.) of seven percent is applicable to many Canadian transactions.

Not only is it critical to determine whether a taxable sale was made in Canada or not, but also where in Canada. If it was made (or deemed to be made) in any of the Harmonized Sales Tax (H.S.T.) provinces (Nova Scotia, New Brunswick, and Newfoundland and Labrador), a higher, fifteen percent H.S.T. rate applies. This is because those provinces have allowed Canada to collect their provincial sales taxes for them.

As well, each province and territory has its own rules. Ontario charges eight percent retail sales tax on many typical Internet transactions whereas Alberta has no provincial sales tax.

Of course, this is only scatching the surface. This entire article is an over-simplification of a very complex subject. You will definitely need professional advice to help you through E-Commerce Taxland.

2. When Exports Aren`t Exports

In Canada, exports are "zero-rated" sales for G.S.T. purposes. This means that when you ship a product to someone outside Canada, you don`t charge G.S.T. Yet, you get to claim (or deduct from the G.S.T. collected by you) all the "input tax credits" (G.S.T. that you paid for business purposes) to make that export. The idea, I suppose, is to encourage exporting.

However, if you export products other than tangible, physical goods, beware! There are many pitfalls to watch out for.

As one example, consider digitized products that you might sell from your Canadian website, such as e-books, downloadable software, or subscriptions to content. You would be considered to be selling "intangible personal property". Unless your product is also considered "intellectual property" (such as software or e-books that you produced or have obtained the rights for), you will have to charge G.S.T. The reason why, according to the Canada Customs and Revenue Agency, is that it COULD be used inside Canada, even if it isn`t.

Say you sold a membership for accessing digitized content (from various sources) on your Canadian website to a customer in the United States. Since there are no restrictions as to where the intangible personal property may be used, and the property is not considered intellectual property (nor the provision of a service), the American customer is subject to G.S.T., even if he never comes to Canada.

Strangely, the same logic doesn`t apply when an American buys a regular book (or a car) which he COULD bring into Canada with him and use here. It is true that it is easier for Canada to assess such items at the border than in cyberspace, but I know of no cases of Americans being taxed on the books or cars they bring with them when they come to live in Canada for about half the year.

As a Canadian registrant, one way you might legally avoid this silly March Hare is to explicitly state on your website and invoice that use of such intangible personal property in Canada is prohibited (or requires an additional fee and the payment of G.S.T.).

3. When Imports Aren`t Imports

Goods shipped to Canada are subject to G.S.T. on importation. Such tax is often assessed at the border. But what if you are a Canadian registered for G.S.T., selling to a Canadian customer but your supplier is in a foreign country?

Pretend that your Canadian customer has bought a book from you from your Canadian website. Your drop ship supplier is located in the United States and is registered for G.S.T. You fax your order to the American company, and they, in turn, ship the book for you (complete with Customs Declaration and their G.S.T. Business Number).

Since they paid the G.S.T., you wouldn`t think you would have to charge it again, would you? "Wrong!", smiles the Cheshire cat. Since you are a registrant located in Canada, you are required to charge and remit the G.S.T.

But you are entitled to input tax credits, aren`t you? In many cases, the answer is "No".

It may be very difficult for you to satisfy the documentary and other technical requirements. As an example, it is not uncommon for American suppliers to absolutely refuse to give an invoice breaking down the G.S.T. or to allow you to be the Importer of Record. This complicates their life unnecessarily and they just don`t need the aggravation.

There are relieving tax provisions covering drop shipping, sales agencies, and other situations. In many cases, unfortunately, the most practical solution is to allow the tax to be paid twice.

4. When You`re Subject to Tax Where You`re Not Subject to Tax

It makes sense that countries impose a tax on sales and income made in their own jurisdiction. But does it make sense for Germany to tax sales made in the United States?

In effect, starting July 1, 2003, the European Union has done just that by imposing an online sales tax.

This means that if someone from England buys an e-book from someone in the United States, the American should submit this tax. Of course, If the sale was to someone in Germany, the tax rate would be different.

The rationale behind this follows: Since countries can`t collect sales tax on Internet transactions at their borders, the only way they can collect it (other than a self-assessment system) is with an online sales tax. Further, it is claimed that businesses in the European Union suffer a major competitive disadvantage because they have to collect Value Added Tax (VAT) but others don`t.

I know what they mean. Welcome to the club!

J. Stephen Pope, President of Pope Consulting Inc., has been helping clients to earn maximum business profits for over twenty years.

For valuable Work at Home Small Business Ideas, visit

In The News:

This RSS feed URL is deprecated, please update. New URLs can be found in the footers at


Cardi B demands to know where her taxes go—here's the answer
Cardi B might be making "money moves" but she's not happy that so much of that money goes to Uncle Sam and she's not sure what she gets in exchange. The Bronx-bred rapper reveals that 40 percent of her income goes to taxes in a video posted to ...
Cardi B wants to know what the government does with her taxesMarketWatch
"I want receipts": Cardi B goes viral asking about her tax dollarsCBS News
Cardi B: Here's where your tax money is goingWashington Post
TIME -Page Six -The Cut -Internal Revenue Service
all 96 news articles »


Taxes From A To Z (2018): L Is For Line Of Credit
For 2017 (the tax year for which you're currently filing your tax return), you can deduct qualifying home mortgage interest for purchases up to $1,000,000 ($500,000 if married filing separately) plus an additional $100,000 for equity debt ($50,000 if ...


Do You Have to Pay Taxes on Bitcoin Earnings? Taxpayers Could Pay the Price if They Don't, IRS Warns
The IRS has warned people who own bitcoin that they must report their cryptocurrency earnings when they file their taxes. Cryptocurrencies, like bitcoin, Ethereum, Litecoin, are the same as property, and tax payers who do not report them could be ...
How to Prepare Your Bitcoin Tax FilingInvestopedia (blog)
IRS Warns Taxpayers To Include Crypto On Income Tax ReturnsCointelegraph
Federal spending bill includes tax provisionsJournal of Accountancy

all 52 news articles »

Seattle taxes may reach a tipping point
Seattle Times
But when does the tax bill become too big? For retirees without the ability to keep up on property taxes, the threshold is already crossed. The effect on the larger economy presents a more complicated question. According to the Tax Policy Center, per ...


Taxes From A To Z (2018): K Is For Kin (Crypto)
Unfortunately, the relatively meteoric rise of many of these currencies means that guidance - both in terms of investing and taxes - may be limited. If you're tempted to dip your toes into the crypto world, here's what you need to know for federal ...

This is what happens when you fudge on your taxes
The IRS has a whistleblower program that gives an informant a cash payout if they help recover unpaid taxes. By. CathieEricson. From all-cash Christmas bonuses to cryptocurrency transactions, it can be tempting to omit hard-to-track income from your ...

Voice of America

China Reacts to US Import Taxes with Similar Measures
Voice of America
China has answered a call by the United States to place billions of dollars in import taxes on Chinese products with its own list of tariffs on American products. However, China's Commerce Ministry also called on the U.S. to “pull back from the brink ...

and more »

Kansas candidates' debate on schools touches taxes, pot
Seattle Times
TOPEKA, Kan. (AP) — If Democrat Carl Brewer were Kansas governor, lawmakers might be discussing legalizing marijuana to raise extra money for public schools as they struggle to agree on a plan for satisfying a state Supreme Court mandate on education ...

and more »


Trump Warns 'This Is The First Of Many' New Taxes On Americans
Donald Trump's warning that new taxes (tariffs) on Americans who buy imports from China will be “the first of many” should worry U.S. consumers, companies and financial markets. There is no question the Trump administration imposing tariffs on over 1 ...

and more »
Google News

Tax Deduction for Alimony Payments? - Yes!

Over 50% of marriages end in divorce in the United... Read More

Where to Find Tax Breaks for Your Home Based Business

April 15th looms in front of most people every year... Read More

History Of The Federal Income Tax

The powers of Congress, and the limitations set upon those... Read More

Take Control of Your Taxes

As everyone in the U.S. knows, we have just passed... Read More

Tax Trap #1 -- Waiting to Incorporate: What A Difference A Date Can Make

NOTE: This is the first in a series of 5... Read More

Tax Deductions - Mr. C.P.A. Can I Deduct a Pizza? You Too Can Deduct Your Fun By Using Tax Tips

Recently, I stumbled across a concept that could change your... Read More

Back To School ? Educators Deduct School Expenses

As teachers and students head back to school following a... Read More

Rearrange Your Affairs For Maximum Tax Savings

One way to maximize your business profits is by reducing... Read More

Uncle Sam is Ready...Are You? Organizing Tips for Tax Time

Anyone who is closely related to an accountant knows that... Read More

Access to E-records by Taxing Authorities: A Case for Pakistan (Part I)

Background issues of access to recordsTo assess the records at... Read More

Save Money on Taxes - Double Your Income Now With Tax Saving Tips on Deductions

Adding Your First Additional Stream of IncomeMost new wealth builders... Read More

Requirements To Produce Tax Information (Whats Up With That?)

"What we've got here is a failure to communicate." ... Read More

Income Tax Returns Your Accountant Should Not File

You've been feeling uneasy (perhaps even guilty) because you've failed... Read More

What Is Tax Law?

The federal tax code is complex. This complexity generally arises... Read More

How to Cut Duty Cost and Increase Profit as an Importer

Import duties continue to be significant elements in the cost... Read More

Know A Tax Cheat? Get Paid To Tell The IRS

According to the IRS, taxpayers underpay their taxes by some... Read More

How To Set Up A Tax-Saving Bookkeeping System

One of the most important, but least understood or appreciated... Read More

10 Thoughts on Tax Offer in Compromise

Beware of advertisements that claim to settle tax debts for... Read More

How Home-Based Businesses Can Avoid Giving Uncle Sam More than His Share

How Home-Based Businesses Can Avoid Giving Uncle Sam... Read More

IRS Statute of Limitations: Do Taxes Ever Expire?

Many Americans believe that an IRS debt is a debt... Read More

Home Based Business Tax Deductions

Running a home based business reaps many wonderful tax deductions... Read More

Getting A Second Extension to File 2004 Taxes

Millions of people file tax return extensions every year. The... Read More

Need an Offshore Sales Office in a Tax Free Environment?

The 100 year old investment-banking firm of... Read More

Tax Reform, My Way

We need real tax reform and we need it now.... Read More

Taxation of Forgiven Debt: The 1099C & You

Often people fall on hard times and stop paying on... Read More