Tax & Trade Blog

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RECENT TAX COURT CASES ON ISC BUSINESS EXPENSES

THE FIRST HURDLE: PROVING YOU ARE CARRYING ON A BUSINESS!

The Canada Revenue Agency (the “CRA”) continues to scrutinize business expenses claimed by taxpayers, particularly where business losses are involved.  These audits can impact Independent Sales Contractors (“ISCs”) of direct selling companies. 

While ISCs are responsible for claiming their own business expenses, the CRA may go further than auditing expenses and can also question whether the ISC is really “carrying on business” at all.  Two recent Tax Court of Canada (“TCC”) decisions in the direct selling space demonstrate the tests the TCC applies.

Direct Sellers and the distributor and representative businesses that work closely with them should be no stranger to oversight and scrutiny from all levels of government, no matter where they operate.

The Canada Revenue Agency (“CRA”) recently added one more headache for in-house Law Departments and other Compliance Professionals with Direct Selling Companies, issuing a warning exclaiming: “Watch out for tax schemes involving multilevel marketing businesses!” (the “Warning”).