eBay sellers face audits -- Canada Revenue Agency
Arizona Coin Collector
http://www.chtv.com/ch/cheknews/story.html?id=65796d52-6a68-40dc-bb52-468a88a0ea3f
eBay sellers face audits
Taxman will come knocking soon for share of online profit
Derek Spalding
Daily News
Published: Friday, July 31, 2009
Tax audits for eBay merchants are nothing new to Nanaimo's
Matt James, who has been selling artwork, collector coins
and fishing tackle around the globe for the past 11 years.
Canada Revenue Agency auditors went through his financial
books in 2005 and 2006.
Come the end of summer thousands of Canadians will go
through the same gruelling process when the federal agency
begins a wave of audits, targeting people who have sold
merchandise through the online eBay marketplace website.
Revenue Canada obtained a list of 5,000 high-volume eBay
sellers along with their transaction records through a
legal fight that has opened the door for the taxman to
go after information from other marketplace websites and
crack down on up to $5 billion in undeclared revenues
from people who do business online.
This new "tax grab" gives an advantage to sellers in the
United States, who don't face such additional expenses,
and it hurts small businesses and artisans who until now
have had easy access to a global marketplace, according
to James. The move could also eventually hurt Canada Post
when more sellers drop out of the business, he said.
Revenue Minister Jean-Pierre Blackburn said his
government will continue to seek out the unclaimed
revenues, despite the criticisms from across the country.
"This is certainly only the beginning of the process,"
Blackburn said.
"We believe that a whole new market is opening
(for the revenue agency.)"
James said he was a bit of a "guinea pig" for the
government when they audited him four years ago.
In business for 11 years, the popular eBay seller said
the government took two years to track his customers
and figure out how to tax everyone.
"I had been a big eBay seller. They had to figure out
how to go about nailing people down," he said.
"They had to figure out how I was getting my money
into Canada."
At the time, CRA agents tried to collect James' records
from eBay.com, but so far they can only collect
information from eBay.ca.
The government obtained its list of 5,000 individual
members or companies and their online transactions on
Nov. 7, 2008 following a lengthy legal battle that
reviewed privacy issues as well as an appeal from eBay.
The website unsuccessfully argued against disclosing
the information on the grounds that it was stored on
an electronic database outside of Canada.
Blackburn said the government could not immediately use
the information in November since there were still
unresolved legal issues and a possibility of an appeal
to the Supreme Court. But he said the government has
since reached an agreement with eBay -- described in
court documents as "the world's largest global online
marketplace" -- that will allow the revenue agency to
use the information from the list.
It includes members who sold more than $1,000 US worth
of products per month (or its equivalent in Canadian
dollars) for any period of three consecutive months in
2004 and 2005.
He said that anyone with previously undisclosed
revenues should voluntarily come forward immediately
to avoid audits, penalties and fines. "Within a month
we will start the audit process, one by one, to
determine whether these people (on the eBay list)
declared their revenues on their tax returns in 2004
and 2005," he said. Blackburn also said the court
decision would open the door for the revenue agency to
obtain transaction records from subsequent years.
The Canadian Taxpayers Federation said it disagreed
with the government's approach.
"The government has taken it upon itself now to start
pro-actively digging on witch hunts with the assumption
of guilt, not innocence," said Kevin Gaudet, federal
director of the lobby group. "Our argument would be
the best way for governments to cause people to
legally comply with taxation requirements is to lower
the taxes."
James has sold fishing tackle since he started selling
on eBay more than a decade ago. He then moved on to
sell art work and coin and currency collections. He
said taxes will only discourage people from having
online businesses in Canada.
"They're going to force people to go across the border
and start shipping from there," he said. "We provide
a service to people who otherwise wouldn't be able
to survive."
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