To reduce some of the administrative burden of record-keeping and reporting, registrants may elect to use the Quick Method of accounting for calculating the net tax. Failure to substantiate the amounts reported on the GST/HST return may result in a reassessment of GST/HST and/or disallowed ITCs.
A TAXI DRIVER 2017 BUDGET DRIVERS
If selected for a GST/HST review or audit by the CRA, drivers will be required to present detailed records of sales, GST/HST collected and input tax credits claimed. As registrants, drivers will be able to claim an input tax credit (ITC) to recover the GST/HST paid on expenses to the extent that they were incurred for use in making taxable supplies of ride-sharing services. Registrants must keep track of revenues and GST/HST charged. When the amendments take effect on July 1, 2017, Uber drivers will be considered to be in a “taxi business” and will be required to register and collect GST/HST on their fares regardless of the level of revenue earned from their taxi/ride-sharing services.
Since ride-sharing services currently are unlikely to have fares regulated by federal or provincial government, many Uber drivers are not required to be registered for GST/HST purposes and collect GST/HST on their fares until such time as they exceed the small supplier threshold. This override to the small suppliers rule means that those in the taxi business are required to charge GST/HST on all taxi revenues. However, under the current rules, small suppliers who carry on a taxi business are effectively excluded from the exception for small suppliers with respect to their taxi business. One of the listed exceptions excludes “small suppliers.” A person is a “small supplier” under subsection 148(1) if their taxable supplies throughout the year do not exceed $30,000.Īs many Uber drivers operate on a part-time basis, they will qualify as small suppliers and will not be required to register for GST/HST purposes. The general rule under subsection 240(1) dictates that every person who makes a taxable supply in Canada in the course of a commercial activity is required to be registered for GST/HST purposes, unless they meet an exception.
The definition of a taxi business becomes relevant when determining a person’s requirements with respect to GST/HST registration.
The proposed wording of the new definition is provided in the Minister of Finance’s March 22, 2017, release of “Tax Measures: Supplementary Information.” The key phrasing designating a ride-sharing service as a taxi business is, “a business carried on in Canada by a person of transporting passengers for fares by motor vehicle… within a particular municipality and its environs if the transportation is arranged or coordinated through an electronic platform or system.” The amendment explicitly excludes sightseeing services and school transportation of elementary students. The Budget’s proposed amendment would expand on the definition of a taxi business to encompass ride-sharing services. The current definition of a “taxi business” in subsection 123(1) of the ETA refers to “a business carried on in Canada of transporting passengers by taxi for fares that are regulated under the laws of Canada or a province.” As the legislation currently stands, the prevailing opinion is that a ride-sharing service is not considered to be a taxi business, as the fares are generally not regulated by either federal or provincial bodies. The proposed amendments would require all Uber drivers to register for GST/HST purposes and to charge GST/HST on their fares.
The 2017 Federal Budget proposes to amend the definition of a “taxi business” in the Excise Tax Act (ETA) effective July 1, 2017, to ensure that ride-sharing services, such as Uber, share the same GST/HST consequences as taxi services. 2017 Federal Budget: GST/HST on ride-sharing services
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