Tax & Trade Blog

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ZERO-RATED OR TAXABLE FOOD & DRINKS?

GST: FINE TECHNICAL LINE BETWEEN ZERO-RATED & TAXABLE FOR FOOD & DRINKS

The supplies of food and beverages that are for human consumption are generally zero-rated for GST/HST purposes in Canada – meaning that a 0% rate of tax applies!   There are exceptions, however, particularly where the food or beverage falls into one of the specific exclusions set out in Part III of Schedule VI to the Excise Tax Act (“ETA”).  This set of rules generally reflects Canada's intention that most food and drink products are free of GST, with the exceptions being fairly limited in scope.

Regrettably, recent Tax Court of Canada (“TCC”) jurisprudence may be applying a more restrictive approach and have been more willing to deny zero-rated treatment based on a threshold inquiry into whether the product qualifies as “food” or “beverage” in the first place.  This is a marked change from earlier jurisprudence.

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NEW CRA FOCUS ON T4A REQUIREMENTS?

BUDGET 2025 CONTAINS POTENTIALLY IMPACTFUL RULES FOR DIRECT SELLERS

Canada's Budget 2025 was launched on November 4^th with the energy of a lead balloon. 

Despite the doom and gloom focus on continuing deficit financing by the current Liberal Government – off-loading today’s woes onto the backs of our children and grandchildren – there was also a not-so-well-publicized change that may impact Direct Sellers.

T4A Reporting

T4A Reporting has been a continuing issue in Canada for many Direct Sellers, especially those operating outside of the traditional "buy-and-resale" model with a distributor selling to his/her own customers (think Amway and Fuller Brush).

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NFR CHALLENGES UNDER CARM

CBSA'S NEW CARM PROGRAM CREATING BIG PROBLEMS FOR NFR STRUCTURES

Canada Customs’s new electronic portal, implemented in October 2024 as part of the Canada Border Services Agency (“CBSA”) Assessment and Revenue Management (“CARM”) system, is throwing up significant challenges for direct sellers trying to ship products into Canada under a personal importation basis.

Specifically, CARM is now effectively requiring all non-resident direct sellers to register as importers and denying their access to easy courier shipments.

The focal point for any of these direct sellers will now be (1) becoming entrenched in the Canadian marketplace, and (2) having all of their dietary supplement products formally registered as Natural Health Products (“NHPs”) with Health Canada.

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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.

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INCOME TAX IMPLICATIONS OF PRIZES & AWARDS

HOW TO VALUE THEM FOR INCOME TAX PURPOSES?

In a previous blog post, we wrote about the GST/HST implications of prizes and awards for direct sellers.  In this post, we turn to the income tax consequences, a topic that often causes confusion for Independent Sales Contractors (“ISCs”).  Understanding how these awards are treated for tax purposes is important as missteps can lead to unintended reporting errors or even overstating tax liabilities.