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.
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.
For direct sellers, one important aspect of running a successful compensation plan is offering bonuses, commissions, prizes and awards to recognize and incentivize high performance. While these incentives are a common feature of direct selling plans, their GST/HST implications are often overlooked. This blog outlines the key GST/HST considerations that direct sellers should keep in mind when providing such incentives.
The new year brings possible new tax reporting requirements for direct sales platform operators (“Direct Sellers”)!
These changes stem from amendments to the Income Tax Act (“ITA”) and mandate that digital platform operators throughout the online “gig” economy report income and certain other information about some of the sellers using their websites or apps to the Canada Revenue Agency (the “CRA”). See our prior article for more technical information.
Those affected include certain Direct Sellers operating on a “buy-resale” model. Filings for the 2024 year are due by January 31, 2025!
