Shopify is being targeted by the Canadian tax agency! 120,000 merchants are being investigated for "old accounts"

It is learned that in April this year, the Canada Revenue Agency (CRA) asked Shopify to provide 6 years of records of all its merchants in Canada to verify their tax status. Recently, Shopify CEO Tobias Lutke tweeted that he did not want to have a dispute with the CRA, but believed that the CRA's request was a minor overstepping of authority and said he would fight to the end.

Shopify has more than 121,600 merchants in Canada, 16,600 of which are located in Toronto. The platform allows businesses to build online stores and sell services. Many Chinese and international students in Canada have realized their entrepreneurial dreams through the platform.

"I don't particularly want to fight the CRA, but we are being asked to provide them with 6 years of records on all Canadian businesses, which to me feels like low-key overreach and we will fight that," Tobias Lutke wrote.

In April, the national minister of taxation, who oversees the CRA, filed an application in federal court ordering Shopify to hand over information on its "Canadian resident merchants" to ensure they comply with the Income Tax Act and the Excise Tax Act.

Both bills require approval from a federal court judge to require a third party, in this case Shopify, to provide such information. The CRA has not yet received approval, court documents show.

But tax accounting firm Tax Heroes said there's a good chance the CRA will approve it because it meets the necessary requirements.

The accounting firm added that Shopify likely knew this and objected, citing "considerations of the merchant's reputation and other policies."

It is understood that in addition to Shopify, another e-commerce giant eBay has also become a target of investigation by the tax bureau and has been asked to provide income information of high-income sellers.

The CRA said it will use "information obtained through anonymous personal requests (UPRs) to identify taxpayers who may not be compliant and verify whether they are correctly reporting their income and meeting their tax obligations."

Rick Watson, founder of RMW Business Consulting, said the request from the federal Minister of Internal Revenue does not necessarily mean that Shopify is non-compliant, but it is very likely that Shopify merchants will be non-compliant if they are not aware of the tax and reporting requirements.

However, Rick Watson believes that the long time period covered by the CRA's request to Shopify is intriguing.

Tax Heroes said on Twitter: "It is important to note that the CRA could have requested a new statement from Shopify within 3 years of the assessment, but instead requested 6 years of records from Shopify, unless the taxpayer made a false statement or gross negligence."

The report said a hearing on the application has been requested for early 2024. If successful, the federal court will issue an enforcement order to Shopify.

Editor ✎ Nicole/

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