Reporting of Internet Business Activities for 2013

The Canada Revenue Agency ("CRA") has been very concerned over the last few years about income tax “slippage” due to Internet commerce. This is a very complicated issue that deals with the location of servers and offshore tax planning.

The CRA has now set it sights on a much easier target, that being income earned from a website or webpage. As of January 1, 2013, the CRA now requires corporations to file Schedule 88, a one-page “Internet Business Activities” as part of their T2 return if the corporation earns income from one or more webpages or websites.

There is a similar requirement for unincorporated businesses on the revised Form T2125 (see Internet Business Activities section) so my fellow bloggers who are sole proprietors or partners in a business are now also caught by this disclosure requirement.

Income from Webpages or Websites

According to the schedule, income from webpages or websites includes:

• The sale of goods and/or services through a website that includes the processing of payment transactions online
• The sale of goods and/or services through a website that requires customers to either call, complete or submit a form, send an email to make a purchase, place an order, booking and/or other transactions
• The sale of goods and/or services through an auction, marketplace or website operated by others
• Income earned from advertising, income programs or other traffic your site generates

 

Reporting Requirements

Corporations (Schedule 88) and unincorporated businesses (T2125) must report the following information on:

• Number of Internet webpages or websites your corporation earns income from
• Provide the Internet webpage or website addresses (URL)
• The percentage of gross revenue generated from the Internet in comparison to the total gross revenue

The CRA has not clarified to my knowledge if they require the form if the corporation has already filed their 2013 return.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

Do you Believe what you Read?

After inflicting the technical rules of a divisive butterfly transaction upon my readers on Monday, I figured I should take the required level of intellectual engagement down a notch today. Thus, my post today should be a little easier to get through.

When I was a young chartered accountant, still wet behind the ears, I wrote an article for a local newspaper on the U.S. income tax filing requirements for Canadians holding U.S. real estate. Somehow that paper made its way to Phoenix (I assume a snowbird took it with them and gave it to a friend) and I received a long distance telephone call in which the caller said “I hear you are the U.S tax expert in Canada.” At that point of my career, I was astounded that anyone would think I was an expert, but the power of the written word said otherwise.

That call was long forgotten until I had a similar experience just a few weeks ago. I wrote a blog on the NBA strike discussing the fixed-pie concept and how it related to the issues in the NBA. A few days later I received an email request from overseas asking if I would agree to be interviewed as a basketball expert by one of the largest radio sports networks in the world (as an aside, I milked this sports expert angle with my friends for days, since we always argue who knows more about sports). Anyways, to my dismay, the network later decided I was not truly a NBA expert and interviewed a U.S. sportswriter in my stead, but again the power of the written word was proven. For many people there appears to be no litmus test, if you are published in any manner be it a newspaper or blog, you are an expert.

Think about the possible consequences of such thinking, especially on the Internet. A couple weeks ago my wife and I purchased sushi grade Ahi tuna at a high end fish store. At the end of the night we still had some tuna remaining. Since the tuna is raw, we knew it had a limited shelf life, possibly not more than the same day. What was my first instinct? Of course, it was to browse the web to see if I could find an answer to my question. I was not comfortable with the qualifications of the people providing answers so I waited until the next day to call the seafood store (they said I could eat it the next day and since I did not get food poisoning, I assume they knew what they were talking about). If I had found the answer on a reputable site, like Health Canada’s website, I am not sure if I would have followed up with the store.

I know many people use the Internet to get information about medical issues and sports injuries. I see no problem with going online to get an understanding of an issue, but it is scary to think that some people assume all the information on the Internet is correct, let alone they use the Internet to make a medical diagnosis. It could literally be hazardous to their health.

Michael James recently wrote an interesting blog called The Best Kept Secret in Investing in which he states “the fact remains that the average person believes in the idea of financial geniuses whose advice they need for insights into the future of stock markets.” This insight is partially on my topic, but his next comment is directly on topic, when he says “When people find out that I write a financial blog, a typical reaction is to ask me about what will happen in the market or with interest rates.”

The presumption that Michael is a financial whiz, who knows the direction of interest rates because he writes a financial blog, is ludicrous. As it happens, Michael is a very astute financial blogger, but there are financial bloggers out there that probably work at the local grocery store, live with their mom and have $10 bucks to their name, yet have a blog called Millionaire Dollar Advice from a Grocery Magnate.

Anyways, since my readers have an extremely high level of sophistication, I know they are always dubious about everything I say :). But in all seriousness, I find it scary that people may make decisions based on what they read without knowing the qualifications of the author.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.