Thursday, 19 July 2018

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Ebay “PowerSellers” Not Beyond The Taxman’s Reach

Ebay “PowerSellers” Not Beyond The Taxman’s Reach - 5.0 out of 5 based on 3 votes

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In an article on April 29, 2008, the Globe & Mail reported that the Federal Court of Appeal has upheld a previous ruling forcing online-auction giant eBay to provide the names, addresses, phone numbers, e-mail addresses and, most important, gross sales figures for all Canadian PowerSellers. An eBay PowerSeller is someone who sells at least $1,000 (U.S.) a month through the site and as such has access to special features and promotions.

The legal battle to withhold the names and protect the privacy of eBay buyers and sellers has been ongoing since 2006, when the CRA launched an investigation to see if PowerSellers were reporting revenue earned through eBay on their 2004 and 2005 income tax returns.

Unfortunately for some taxpayers who may now be exposed to the scrutiny of the CRA as a result of the ruling, this initial sweep could be the tip of the iceberg:

“…[eBay]… had about 10,000 PowerSellers in 2004 and 2005. There are five levels of PowerSeller status and qualifiers are eligible for prioritized support services and special promotions. There are likely far more PowerSellers today and it is not clear whether the CRA will audit them as well.”

While eBay may try to continue the legal fight to not disclose customer contact information, it is worth noting that the CRA has won virtually every legal battle thus far. That means that the chances are very good that all PowerSellers’ full identities will become known to the CRA.

This is one of a number of initiatives that demonstrates the CRA’s hard-line stance on those who are earning income through new media endeavours and businesses.

It’s a challenging situation on a number of levels. It’s quite possible that sellers don’t expect to achieve such high-volume sales at the outset of their internet campaign. As profits grow and order-fulfillment becomes more time-consuming, record keeping can suffer. The unfamiliarity that people have with new media ventures as opposed to traditional employment and income-generating endeavours could further lead to confusion about what and when income is taxable.

But the CRA is making it clear that it will entertain no grey areas. They are starting to look very closely not only at eBay’s PowerSellers, but at any number of online ventures.

Powersellers need to remember that every year the CRA automatically cross-references all T-4 employee returns with taxpayer SIN numbers. If the same SIN number comes up in more than one instance, the CRA will review the taxpayer’s return to see if the taxpayer reported all their T-4’d sources of income. Cross-referencing PowerSeller data into this same matching system would instantly disclose if the taxpayer is including eBay-generated income in his or her tax return.

The best advice? If you have been profiting from any online activity without reporting that income to the CRA, you are at risk.

Our free on-line assessment can help identify what action you may need to take to clean up your unreported income before the CRA comes after you.


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