Canada Considers “Netflix Tax” Again

streamingReport: Canadian Government Fails to Collect $169 Million in Sales Taxes Annually on Digital Goods & Services

Canada loses approximately $169 million annually in sales tax revenue, according to a recent report from the nation’s interim auditor general. These losses are the result of Canadians failing to pay taxes on digital purchases from foreign vendors. As a result, the auditor general’s office noted Canadians often pay more for domestic digital goods than their foreign counterparts.

Interim AG: Most Canadians Do Not Pay Their Own Sales Tax on Foreign Purchases

Interim Auditor General Sylvain Ricard submitted a series of five performance audits to the Parliament of Canada on May 7. One of these audits focused on the taxation of e-commerce. The audit noted the rapid rise of e-commerce, particularly with respect to “digital products” for music and video, creates “challenges for assessing” the federal goods and services tax (GST) and the harmonized sales tax (HST).

 

Domestic sellers of digital goods and services are required to collect GST and HST from individual consumers and remit those payments to the government. But foreign vendors with no “permanent establishment” in Canada are not required to make such collections under federal law. This does not mean that foreign sales are exempt from taxation. Rather, if an individual consumer’s total purchases of foreign digital goods results in a GST or HST tax liability of more than $2, it is that consumer’s responsibility to fill out a form and pay the applicable tax.

 

In practice, most Canadian consumers simply ignore this duty. According to Ricard, while approximately two-thirds of Canadian adults “purchased digital products from both foreign and domestic vendors between July 2017 and June 2018,” only 524 people filed GST or HST forms on those purchases. And the Canada Revenue Agency (CRA) only has “limited authority” to ensure compliance.

 

For instance, Ricard noted, while the United States government requires all payment processors to provide their financial data to the Internal Revenue Service, the CRA lacks a similar ability to collect such third-party information without first obtaining a court order. This, in turn, reduces the CRA’s ability to “detect and deter non-compliance.”

 

The costs of this non-compliance are not insignificant. Ricard’s office estimated the total GST losses for the 2017 fiscal year alone was $169 million. And given the increasing role of cross-border e-commerce in Canada’s economy, Ricard recommended the CRA “implement mechanisms to track, monitor, and report the number of compliance activities it conducts to manage the risk of non-compliance.”

Cross-Party Opposition to Any “Netflix Tax”

But it may not be that simple. Enforcing sales tax collection on foreign digital goods, especially popular U.S.-based services like Netflix, is unpopular with Canadian politicians. During the 2015 federal election, then-Prime Minister Stephen Harper released an ad saying his Conservative Party was “100 per cent against a Netflix tax,” according to a recent report in the Toronto Star. Harper’s rival, Liberal Party leader and current Prime Minister Justin Trudeau, also came out against efforts to require Netflix and other non-Canadian vendors to collect the GST and HST.

province flags

Some Canadian provinces, however, are taking a harder line. The auditor general’s report noted the British Columbia provincial government has independently “reached an agreement with a major foreign accommodation sharing platform” to “voluntarily collect the provincial sales tax (PST) and remit it directly to the government.” Meanwhile, the Quebec National Assembly has passed its own legislation requiring foreign businesses to “register for, collect, and remit sales taxes,” regardless of whether they have a “permanent establishment” in Quebec or Canada.

 

As federal law currently stands, according to Ricard, the CRA lacks the “legislative authority or flexibility” to follow either British Columbia or Quebec’s example. And with the next federal election expected later this year, there may be little incentive for any of the major political parties to pursue the issue in the short-term.


Looking for Canadian Sales Tax Rates for your business?  Zip2Tax has easy, fast downloadable tables.  Or look here for general tax rates by province.


 

Maine Legislators Consider “LOST”

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Maine Legislators Consider Authorizing Local-Option Sales Taxes

Although most U.S. states permit their local governments to collect certain types of sales taxes (in addition to the statewide tax), about a dozen state still do not. One such state is Maine, which currently assesses a statewide sales tax of 5.5 percent only. But there is a renewed effort in the state’s legislature to authorize local-option sales taxes (LOST), which could provide an additional source of revenue for cash-strapped municipalities.

Bills Would Allow Municipalities to Target Sales Tax Increases During Tourist Season

There are several LOST bills currently pending before the Maine Legislature. One such bill, known as LD 65, would allow municipalities to impose a local sales tax after obtaining approval in a voter referendum. The referendum question would need to include not only the proposed tax rate, the “purposes for which the revenue will be used,” and any months when the LOST would not be collected.

This last item means that the municipality would not have to collect its portion of the sales tax year-round. Rather, localities could focus tax collection efforts on the summer months when Maine typically attracts a large number of tourists. According to the Portland Press Herald, roughly 36.7 million people visited Maine in 2017, spending approximately $6 billion throughout the state.

A second proposal, LD 1254, would allow for a LOST of up to 1 percent on restaurant meals and lodging. Like LD 65, LD 1254 would require a referendum and allow localities to specify the months in which the local sales tax would apply. But while LD 1254 is restricted to “prepared food or the value of rental of living quarters” to travelers, LD 65 permits collection of local sales tax on any item that is already subject to Maine’s statewide sales tax.

Conservative, Liberal Activists Challenge LOST Proposals

Not surprisingly, many conservative anti-tax groups oppose the LOST bills. Jim Fossel, a former staffer for Republican U.S. Sen. Susan Collins, wrote in an editorial for the Press Herald that “the very concept of a local-option sales tax is fundamentally flawed.” Fossel argued it was a “competitive advantage” for Maine not to have such taxes, and that “towns and cities across Maine ought to continue doing what they can to cut costs and constrain spending.”

What’s interesting is that some liberal activists agree with Fossel–at least with respect to opposing the LOST. Sarah Austin of the Maine Center for Economic Policy, which describes itself as a “progressive voice” for “Maine working families,” wrote on the organization’s website, argued legislators should reject LD 65 and LD 1254 as it would disproportionately benefit those “communities heavily reliant on the tourism industry” while “doing little–or even nothing–for others.”

Austin noted that 10 municipalities in Maine generated 45 percent of the state’s meals and lodging revenue, yet only contained 16 percent of the state’s permanent population. And even a general LOST that was not limited to meals and lodging, such as the one proposed by LD 65, would hit poorer Maine residents the hardest. For this reason, Austin said a sales tax increase limited to meals and lodging would be preferable, but only if implemented as part of more comprehensive tax reform, including higher income tax rates for the “wealthiest and profitable corporations.”

 

 

phone apps

Georgia House Goes a Step Further to Collect Sales Taxes

Georgia House to Require “Marketplace Facilitators” like Uber, Airbnb, and Ebay to Collect Sales Taxes

In the wake of the U.S. Supreme Court’s June 2018 decision in South Dakota v. Wayfair, Inc., a number of states have quickly moved to require out-of-state Internet-based sellers to collect and remit sales taxes on in-state purchases. For example, a new law took effect in Georgia on January 1, 2019, mandating retailers collect that state’s 4 percent sales tax for all online sales.

Now, Georgia legislators may go a step further and compel “marketplace facilitators” like eBay, Uber, and Airbnb to collect state sales tax on transactions completed by their users.

House Bill 276

On March 4, the Georgia House of Representatives passed House Bill 276 by a vote of 158-6. HB 276 proposes to expand the definition of what businesses qualify as “dealers” required to collect and remit sales tax. Specifically, the bill states anyone who “[a]cts as a marketplace facilitator to facilitate retail sales” in excess of $100,000 per year is now a dealer.

A “marketplace facilitator,” in turn, is any business that provides services designed to “facilitate a retail sale that is taxable” under Georgia law.

This includes but is not limited to the following:

  • providing any physical or electronic infrastructure to to bring “purchasers and marketplace sellers together”;
  • transmitting or communicating any offers (or acceptance of offers) between purchasers and sellers;
  • processing and collecting payments from purchasers on behalf of sellers;
  • taking orders or reservations on behalf of sellers; or
  • providing advertising, marketing, or other promotional services.

To put this in practical terms, HB 276 would likely apply to the following situations:

  • A resident of Macon, Georgia, purchases a computer on eBay from an out-of-state seller. HB 276 requires eBay to collect and remit the Georgia sales tax on this purchase.
  • A group of friends in downtown Atlanta arrange for a ride via the Uber app. HB 276 requires Uber to collect and remit the sales tax on this sale.
  • Out-of-state tourists arrange to stay in a private home in Augusta by making a reservation using Airbnb. Now Airbnb must then make sure to collect and remit the sales tax.

In other words, this Bill shifts the burden of dealing with sales taxes away from the individual sellers; many of whom may be too small to register with Georgia authorities; and places it on the companies that “facilitate” transactions with the purchasers.

GA Stands to Receive Millions from Online Sites

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Remote Seller + New Year = New Sales Taxes

Remote Sellers…..Are you ready?

Seven states implemented their economic nexus sales tax rules for remote sellers with the new year.

These States all have effective dates of January 1st.

  • District of Columbia
  • Georgia
  • Iowa
  • Louisiana
  • Nebraska
  • New York
  • Utah

Do you have your sales tax rates in place for each state?  Do you know if you meet the thresholds? See our Economic Nexus Chart for a complete overview of the States and their guidelines.

STATE$ Gross Receipts
Limit
# Retail Sales
Transactions
EFFECTIVE DATEDepartment of Revenue Links
Alabama$250,000October 1, 2018AL DOR Announement
ArkansasProposed $100,000Proposed 200TBDHouse Bill 1002 still in discussion.
Colorado$100,000200December 1, 2018CO Info for Remote Sellers
Connecticut$250,000200December 1, 2018CT DOR Announcement
District of Columia$200,000200January 1, 2019DC Internet Sales Tax Amendment Act of 2018
Georgia$250,000200January 1, 2019GA Requirements
Hawaii$100,000200July 1, 2018HI DOR Announcement
Indiana$100,000200October 1, 2018IN DOR Tax Bulletin
Iowa$100,000200January 1, 2019IA DOR Announement
Kentucky$100,000200July 1, 2018KY Ruling FAQs
Louisiana$100,000200January 1, 2019Louisiana DOR
Maine$100,000200July 1, 2018ME Help for Remote Sellers
Maryland$100,000200October 1, 2018MD DOR Tax Alert
Massachusetts$500,000100October 1, 2017MA DOR rule has been in effect since 2017
Michigan$100,000200October 1, 2018MI DOR Document
Minnesota$100,000100October 1, 2018MN Bulletin for Remote Sellers
Mississippi$250,000September 1, 2018MS DOR Guidance for Online Sellers
Nebraska$100,000200January 1, 2019NE DOR News Bulletin
New Jersey$100,000200October 1, 2018NJ DOR Notice for Remote Sellers
New York$300,000100January 1, 2019NYS DOR Announcement
North Carolina$100,000200November 1, 2018NC DOR Directive
North Dakota$100,000200October 1, 2018ND DOR
Pennsylvania$10,000March 1, 2018PA DOR
Rhode Island$100,000200RI DOR FAQs for Remote Sellers
South Dakota$100,000200October 1, 2018 SD DOR Remote Seller Law
Texas$500,000October 1, 2019
Utah$100,000200January 1, 2019Online Sales Tax Amendments
Vermont$100,000200July 1, 2018VT DOR
Virgina$100,000200TBD
Washington$100,000200October 1, 2018WA DOR
Wisconsin$100,000200October 1, 2018WI DOR FAQs
Wyoming$100,000200Date TBDWY DOR Page

We Have The Tax Rates

Zip2Tax has Sales  and Use Tax Tables that offer a wide range of options to meet your needs.  Online shopping cart integration, ERP system platforms, call centers and invoicing programs. Single state, entire US and/or Canada, monthly subscriptions or one-time downloads…whatever you need.

All ZIP codes in every State included—over 12,000 jurisdictions!

Automate your online shopping cart with sales tax data at the point of sale. A secure sales tax API connects your database to the Zip2Tax constantly updated servers to power your e-commerce site with a real-time data when you need it.

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Use this handy comparison chart to match our services to your needs.

 

Internet Sales Taxes and Remote Sellers

internet shopperInternet Sales Taxes

The United States Supreme Court ruled in South Dakota v. Wayfair on June 21, 2018, that states can require remote sellers to collect and remit sales tax on items delivered to locations within their state regardless of physical presence.

Remote Sellers

If you sell to a state, but do not have a physical presence in that state, you are now a Remote Seller.  As a remote seller, you will need to check with each state to determine if you are required to register in that state.

Who-What-Where-When-Why

Registration requirements, small business exemptions, effective dates, and other factors all vary by state.  Some states have not published their rulings yet; and other states don’t have plans to implement a ruling in the near future.

The following chart will be updated regularly as new information becomes available.  It is not legal advice, but it is an informative reference with links to the departments of revenues and their publications on the topic.

STATE$ Gross Receipts
Limit
# Retail Sales
Transactions
EFFECTIVE DATEDepartment of Revenue Links
Alabama$250,000October 1, 2018AL DOR Announement
ArkansasProposed $100,000Proposed 200TBDHouse Bill 1002 still in discussion.
Colorado$100,000200December 1, 2018CO Info for Remote Sellers
Connecticut$250,000200December 1, 2018CT DOR Announcement
District of Columia$200,000200January 1, 2019DC Internet Sales Tax Amendment Act of 2018
Georgia$250,000200January 1, 2019GA Requirements
Hawaii$100,000200July 1, 2018HI DOR Announcement
Indiana$100,000200October 1, 2018IN DOR Tax Bulletin
Iowa$100,000200January 1, 2019IA DOR Announement
Kentucky$100,000200July 1, 2018KY Ruling FAQs
Louisiana$100,000200January 1, 2019Louisiana DOR
Maine$100,000200July 1, 2018ME Help for Remote Sellers
Maryland$100,000200October 1, 2018MD DOR Tax Alert
Massachusetts$500,000100October 1, 2017MA DOR rule has been in effect since 2017
Michigan$100,000200October 1, 2018MI DOR Document
Minnesota$100,000100October 1, 2018MN Bulletin for Remote Sellers
Mississippi$250,000September 1, 2018MS DOR Guidance for Online Sellers
Nebraska$100,000200January 1, 2019NE DOR News Bulletin
New Jersey$100,000200October 1, 2018NJ DOR Notice for Remote Sellers
New York$300,000100January 1, 2019NYS DOR Announcement
North Carolina$100,000200November 1, 2018NC DOR Directive
North Dakota$100,000200October 1, 2018ND DOR
Pennsylvania$10,000March 1, 2018PA DOR
Rhode Island$100,000200RI DOR FAQs for Remote Sellers
South Dakota$100,000200October 1, 2018 SD DOR Remote Seller Law
Texas$500,000October 1, 2019
Utah$100,000200January 1, 2019Online Sales Tax Amendments
Vermont$100,000200July 1, 2018VT DOR
Virgina$100,000200TBD
Washington$100,000200October 1, 2018WA DOR
Wisconsin$100,000200October 1, 2018WI DOR FAQs
Wyoming$100,000200Date TBDWY DOR Page

We Have The Tax Rates

Zip2Tax has Sales  and Use Tax Tables that offer a wide range of options to meet your needs.  Online shopping cart integration, ERP system platforms, call centers and invoicing programs. Single state, entire US and/or Canada, monthly subscriptions or one-time downloads…whatever you need.

All ZIP codes in every State included—over 12,000 jurisdictions!

Automate your online shopping cart with sales tax data at the point of sale. A secure sales tax API connects your database to the Zip2Tax constantly updated servers to power your e-commerce site with a real-time data when you need it.

Use this handy comparison chart to match our services to your needs.  Then give us a call, email or Chat!

 

 

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