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  1. #1
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    January 18th, 2005
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    Question for Canadian affiliates
    Revenue Canada recently assigned me a GST registration number. I just got off the phone with them. The woman told me I had to charge GST to all Canadian companies I'm affiliated with for every sale I make for them. Apparently having links on a website equals providing a service to that Canadian merchant and they have to pay GST on top of the commissions. So if my commission on a sale is $100 the merchant has to pay me $105, the extra $5 being the GST amount. If no extra money is paid for GST, the agreement/contract needs to say that the GST is included in the commission amount. That amount has to be claimed on my income tax return.

    Now Revenue Canada wants me to go back several years and file the GST report for every year in question. It certainly isn't worth it for me to do so since I would probably get peanuts back and my accountant would charge me a fortune to do this.

    I don't pay GST unless I buy supplies in a store in Canada, a small portion for bills, gas, whatever home business deductions, I have never charged GST to any Canadian merchant, the money I would get back is minimal at best, what the hell?? She finally told me I didn't have to claim any of it and to just fill the spaces with zeroes but if I never claim any GST eventually my income tax return would be flagged and it might possibly get me audited!!!

    Most of my merchants are in the US and none of this applies to them, thank God! But I do have a few Canadian merchants that are not part of a network.

    How are other Canadian affiliates dealing with GST in affiliate marketing? It sure isn't easy to explain affiliate marketing to people who never heard of it and just don't have a clue.

    YIKES!

    Catwoman

  2. #2
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    April 6th, 2006
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    I will ask my accountant about this one..

    The GST is paid by the customer at the time of the purchase, and subsequently remitted by the store. For the government to suggest YOU charge GST on the commission would be a clear case of double-dipping. I can't imagine we would be forced to charge GST on top of GST.

    You are only receiving a percentage of the original sale, which already includes GST.

    I don't have any Canadian merchants yet, but with this type of government logic, I won't be signing up any soon...

    (sidebar: since affiliate payments are considered "expenses" on the merchant income statement, they are remitting 100% of the GST collected to the govt)

  3. #3
    ABW Ambassador
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    November 25th, 2005
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    How are you claiming your income? This doesn't sound correct at all! As teezone said - it will amount to double payment of the GST. The GST should be paid out-of-pocket by the final consumer of the good or service. I suppose it comes down to the definition of a service. If we are now in the GST loop then the Networks should be too. I may skip the accountant and jump right to my member of Parliament - they can give you an answer that you can take to court...

  4. #4
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    January 18th, 2005
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    Quote Originally Posted by teezone
    I will ask my accountant about this one..

    The GST is paid by the customer at the time of the purchase, and subsequently remitted by the store.
    Yes I told her that... several times.

    For the government to suggest YOU charge GST on the commission would be a clear case of double-dipping. I can't imagine we would be forced to charge GST on top of GST.

    You are only receiving a percentage of the original sale, which already includes GST.
    Her point was this...

    I am considered self-employed. I provide a service to Canadian merchants by putting their links on my sites. GST fees are applicable to any and all services provided by self-employed individuals and/or companies. According to her, the merchant isn't paying GST on the sale which is paid by the customer, they are paying GST on my service of putting up their links. If the fee they pay me is a commission for that link, then they have to pay GST on that fee which would be 5% of the commission.

    I don't have to claim GST I paid on supplies or any other business deductions. Of course not, that's money they would owe me. But they want me to go back and calculate how much money I've made from Canadian merchants in the last few years and I have to PAY the GST that they should have paid me (even though none of them ever did because I've never heard of such thing online). If agreements don't say that the commission includes GST, then I have to pay GST on the full commissions I've received from all Canadian merchants!!!

    I told her I got paid in US funds even from Canadian merchants. Doesn't make any difference. If they are in Canada, that's all that matters.

    This is completely insane!

    Catwoman

  5. #5
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    You actually don't provide a "service", this is revenue-share. That could be the disconnect on her part.

    All it takes is one merchant transaction to clear this up.. if a transaction totals $25 (including GST), and you were paid $2.50 commission, that should resolve the matter.

    BUT.. it could vary from store to store, I just found this on Canadian Tire's website:
    Why does canadiantire.ca want my GST number?
    We request a GST number for tax purposes only. It is the responsibility of every Canadian affiliate website to record the GST amount they receive from canadiantire.ca. In addition to the commission you will be earning canadiantire.ca pays affiliates GST for the services they provide. The GST amount is not included in the commission rate, instead it is added to the monthly commissions earned by affiliates.
    I suppose the rule of thumb would be if you collected GST, then you have to remit it. But according to you, you haven't had a GST number until now, so you wouldn't have been collecting it. This is a go-forward issue, not retroactive.. for example, using Canadian Tire above, they wouldn't have been paying you GSt without a valid number. AND you only charge GST after you reach a certain annual income.

    Sounds like a NY Tax problem of our own in Canada.

  6. #6
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    January 18th, 2005
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    At least Canadian Tire makes the issue very clear to all affiliates. Too bad they're not one of my Canadian merchants.

    Because I've been over the minimum for the last 4 years, I have to submit these GST forms for every one of those years except for the first year for whatever reason she told me, I don't really remember why, something about not reaching minimum until the last quarter. It didn't make sense to me. Yes it is retroactive because even though they just issued the number, they made my GST registration effective as of 3 years ago. I didn't even ask for a GST number, Revenue Canada called me a few weeks ago (after they received my income tax return) to tell me I needed it. She went back a few years and realized I had been self-employed for quite some time. So she made the registration valid from whenever she figured it should be which is 3 years ago. The person I talked to that day didn't understand any more about affiliate marketing than the one I talked to today.

    The whole thing is stupid. We are like salespeople working on commission only. I don't know how it works in real life, but I don't think commissioned salespeople charge GST to the company they work for, do they? Then why are we forced to charge GST? To me, it's the same thing, except one is in real life and the other is on the internet. Where's the difference??

    I just don't get this.

    Catwoman

  7. #7
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    I still think it comes down to each merchant.

    If they paid you GST, you have to remit.. if THEY paid the GST on 100% of the customer transaction, you don't have to pay GST (ie. there is nothing to remit).

    You should contact each merchant (or review a specific transaction for each), and base your accounting on the GST portion that you would owe. Anything above that is a double-dip.

    I would've said it was all double-dipping until I saw that statement on Canadian Tire's website.

    You can prove it to Revenue Canada using each merchant's policy on how they handled GST. To simply take your total revenue & make you pay GST is completely wrong, and you can prove it by accounting for each merchant.

  8. #8
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    January 18th, 2005
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    Canadian Affiliates and GST
    Hi All,

    I recently underwent a 'mini' GST audit much the same as you did, Catwoman, and received exactly the same explanation regarding 'link placement as a taxable service to Canadian merchants'.

    All but one of my Canadian merchants was great in paying their GST outstanding for past years and now they pay the GST monthly in a separate check... in Canadian dollars.

    Considering this is completely revenue-neutral to merchants (who just claim it back as paid), you hopefully will have no problem making the same arrangements with your merchants.

    And although it becomes revenue-neutral when everyone plays nice (and by the rules) it DOES seem odd that GST can be assessed on commissions of which 95% of the sales were likely made to residents outside of Canada. Grrr.

    Cheers,
    Ros

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