Chief executive officer of Shopify Tobias Lutke tweeted on Friday that the company intends to fight a request from the Canada Revenue Agency (CRA) to turn over six years of records of more than 121,000 Canadian stores using the firm’s platform.
Lutke said that the request “feels like low-key overreach.”
The government is, reportedly, seeking the records in order to verify that Canadian merchants were obeying the Income Tax Act and the Excise Tax Act.
Both acts require approval from a Federal Court judge in order to obtain such documents through a third party, in this case Shopify. Court documents show that CRA has not received approval yet.
But tax accounting firm Tax Heroes says that the agency will likely receive approval as it fulfills the necessary requirements.
Shopify likely knows this, the accounting firm added, and is hence objecting “to enhance their reputation of defending merchants and other policy considerations.”
In the past, the CRA also sought records from PayPal and eBay over tax and reporting concerns.
The CRA said that it uses information obtained through “unnamed persons requirements (UPR) to identify taxpayers that may have been non-compliant and verifies that they have appropriately reported their income and have satisfied their filing obligations.”
According to federal court documents, the minister of national revenue began seeking the records in April this year.
The request does not necessarily mean that Shopify is non-compliant, Rick Watson, founder of RMW Commerce Consulting told the Canadian Press, but could stem from merchants not understanding tax and reporting requirements until they are fined, or perhaps they had been found not in compliance in the past.
But the lengthy time period covered by the request to Shopify is intriguing, Watson said.
Tax Heroes said in a tweet, “Keep in mind, CRA can reassess a return up to 3 years after an assessment, unless there was a misrepresentation or gross negligence from the taxpayer. 6 years of documents have been requested from Shopify.”
All parties involved are now asking for a one-day hearing on the matter to take place between Feb. 13 and Mar. 17, 2024, according to the Canadian Press.
The Ottawa-based e-commerce company cut 10 per cent of its workforce last summer as it admitted that it mistakenly believed that the growth it experienced during the pandemic would continue. Shopify axed another 20 per cent of its workforce earlier this year as it sold its logistics division to California-based supply chain management company, Flexport.
