Written on behalf of Feigenbaum Consulting
In December, Uber Canada Inc. (Uber Canada), the Canadian arm of Uber Technologies Inc., filed a notice of appeal with the Tax Court of Canada, asking the tax court to vacate reassessments made by the Canada Revenue Agency (CRA).
The reassessments issued by the CRA covered the period between October 2012 and June 2013. According to the CRA, Uber Canada is responsible, in that time period, for accounting for sales tax on rides provided by the service.
The amount in dispute is more than $670,000 in tax charges, penalties, and interest.
Uber Canada: We Are a “Marketing and Support Service”
Uber Canada argues that rather than providing transportation services to riders, it is Uber Canada’s “driver-partners” (who Uber Canada treats as independent contractors, not employees of Uber), who supply the transportation.
Indeed, the Uber Canada website warns drivers that they are independent contractors and that:
“When you work for yourself, you’re responsible to collect, remit, and file your sales tax — HST in Ontario, GST in Alberta — on all your ridesharing trips to the Canada Revenue Agency (CRA).”
It is Uber Canada’s position on appeal that the company only provides “marketing and support services” for the driver-partners.
Further, Uber Canada states that it provides these “marketing and support services” to its corporate owners, Uber Technologies, who are based in San Francisco. It is the corporate owners who automatically bill the credit cards of Uber passengers, collect fares on behalf of the driver-partners, and then pay fares to the driver partners (minus an Uber fee charged to driver partners for using the Uber app).
An Uber Canada spokesperson has said that the company “pays its taxes in all jurisdictions as required.”
The Federal Government’s Position
The federal government has not yet filed a reply to Uber Canada’s Notice of Appeal. However, several years ago, the government amended the definition of a “taxi business” under the Excise Tax Act in order to “level the playing field” and ensure that ride-sharing businesses (including Uber and its competitor Lyft) are subject to the same tax rules as traditional taxis.
As a result of the changes, which came into effect on July 1, 2017, self-employed commercial ride share drivers (such as Uber “driver-partners”) who provide taxable ride-sharing services are required to register for a sales-tax account irrespective of the amount of money they are making. Those drivers are also then personally responsible for charging, collecting, and reporting the sales tax to the CRA.
These claims have yet to be proven in court. We will continue to follow this matter as it proceeds and will provide updates as they become available.
In the meantime, if you have questions about personal tax planning, HST remittances, paying taxes as an independent contractor or self-employed individual, or other related matters, contact Mark Feigenbaum. We assist our clients in making informed choices that lower their overall tax burden, ensure tax compliance and avoid penalties that can amount to thousands of dollars. We offer our clients confidence knowing that they have a highly skilled team working to manage tax issues.