Godaddy - tax evasion? (1.Viewing)

So I've been going back and forth with Godaddy brokers over numerous individual domain negotiations for years now. I've been saying something to this effect:

I'm a GST registered Canadian corporation and as such, I am obligated to collect and remit GST or HST from domain sales. In order to do that, I need to know the buyer's address. I am fine with being provided the buyer's address after agreeing on a price as long as they're OK with paying the applicable tax due. As such, I will provide an invoice with my GST # so that the buyer can claim the GST paid back as an Input Tax Credit.

This has certainly been negatively affecting my sales through godaddy brokers, and I've gotten different answers from different brokers. However, today I got one where the broker said:

For the purposes of this transaction, GoDaddy is the purchaser of the domain name and we're a U.S. corporation so there is no applicable VAT on your end as the seller.

With that, we transact in USD. To confirm, if the buyer comes up to $X USD you would be willing to sell?

I replied with:

Yes, that is correct, if I am selling to an entity with no Canadian presence or offices, and I am supplied their non-canadian billing address, then I can sell it with no taxes added. So if that's what Godaddy is declaring, then yes, I am willing to sell it to GoDaddy for $X USD net to me.

Note that I worded it specifically to ensure that GoDaddy is taking the liability. But personally, I think this is tax evasion - not that I'm a tax professional. My reasons are:

1. I believe that Godaddy has Canadian offices and charges its Canadian customers GST/HST on domain purchases, therefore they are GST registered themselves. The question for CRA would be, can they pick-and-choose which billing office is the most tax efficient for them to use? In my mind, they have Canadain offices and are GST registered and therefore they should be required to not only collect GST/HST, but also pay it. But if Godaddy's broker division works exclusively out of US offices, and none work out of Canadian offices, then maybe CRA would say that they can use their US office address as the basis for taxation.

2. I'm pretty sure that some years ago, CRA dealt with the increase in online taxation issues by saying that even if you are a non-canadian entity, but you do $30K+ per year in Canadian "online" transactions, then you are still required to register for and remit GST/HST. So even if GoDaddy is declaring to be a US corporation, they certainly do more than $30K/yr in brokering and therefore they would/should be collecting and remitting GST/HST, and therefore also paying GST/HST.

3. GoDaddy, by declaring they are the purchaser, they are no longer acting as a broker - which changes the nature of the transaction. They could be claiming to buy the domain name tax free from me by claiming to be a US corporation, but then re-selling the domain to the buyer (presumably in Canada) from their Canadian corp and then charge that customer GST/HST themselves.

The taxation & transparency issues has always made working with brokers difficult for me. I don't want to be on the CRA hook for willingly turning a blind eye to proper taxation. Does anyone here have any thoughts on dealing with brokers and how should taxation work when there is an unknown buyer?

I wonder if a document could be created that a broker would sign that declares that, as the only party knowing both the buyer and seller details, that the broker would take full responsibility for any taxation collection and remittance and that they relieve both the buyer and seller of any responsibility for taxation issues. I wonder what CRA would say about how to handle stealth broker transactions?

@BillSweetman have any thoughts? Anyone else?

Godaddy charges me HST, so they are technically fully Canadian Sales Tax compliant.

@jamesiles any input with this?

I am not a tax accountant and certainly don't know the specifics about how GoDaddy handles things, but as a general rule of thumb, when I have overseen deals where the Buyer is based in Canada and the Seller is based in Canada, and the Seller is required to collect HST, and the Buyer is purchasing directly from the Seller, then HST is added to the transaction. Not all Sellers collect HST, so a lot depends on the Seller.

BillSweetman said:

I am not a tax accountant and certainly don't know the specifics about how GoDaddy handles things, but as a general rule of thumb, when I have overseen deals where the Buyer is based in Canada and the Seller is based in Canada, and the Seller is required to collect HST, and the Buyer is purchasing directly from the Seller, then HST is added to the transaction. Not all Sellers collect HST, so a lot depends on the Seller.

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Having brokered some domains myself where I've let the seller invoice the buyer directly (with their GST#) thus allowing the buyer to have the backup that they paid GST/HST, allowing them to claim it back as an Input Tax Credit. As the broker, I just invoiced the buyer separately for my commission, and include GST/HST for that too. That works well when you're dealing with a trusted seller as I was. If as a broker I was dealing with 2 untrusted parties on a large transaction, I might opt for escrow.com and use their broker transaction option.

BTW - I know that liability for paying GST/HST is not only on the seller, it is also on the buyer. So if a buyer gets an invoice without GST/HST added when it should have been, the seller can actually sue the buyer to recover the GST/HST if they later catch the mistake. However, if the seller's invoice says "inclusive of all taxes", that releases the buyer from being liable.

In any case, knowing that liability is on both parties, I wondered about when a seller is too small to be GST registered (under the $30K/yr threshold) - is the buyer required to self-assess and pay the GST/HST ?? But no, In those cases, if the seller isn't required to collect it, then the buyer is also not required to self-assess and pay it. It is truly a tax-free transaction in that case. CRA quote here:

Recipient not required to pay GST/HST

6. A recipient of a taxable supply (other than a sale of real property) made by a small supplier who is not registered for GST/HST is not required to pay the GST/HST on the supply. Refer to paragraphs 30 to 34 for information on small suppliers.

Source: Liability for Tax - Canada.ca

I just responded to another new inquiry from another new godaddy broker that I haven't worked with before, with a similar message about taxation:

Also note that we're incorporated in Canada and are obligated to charge tax (GST or HST) based on the province of the buyer. I'll be happy to provide the buyer with an invoice including our GST # so the buyer can recover the taxes paid as an Input Tax Credit.

It will be interesting to see how this broker handles it...

I don't worry about it on godaddy sales, I treat them all as out of country.

MacMan said:

I don't worry about it on godaddy sales, I treat them all as out of country.

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I would love to do that, but I also don't want to get audited, then have them tell me clearly this was a canadian buyer and tell me I owe the GST/HST... Thjat would be a significant hit if they went back over 6 years of godaddy sales and said I owed 5-to13% on all of them. Would love to just find the proper way of handling it from the start, and have godaddy handle it properly too.

Oh, one other annoying godaddy issue. Currency. It would be nice if Godaddy brokers would deal in CAD and not force two currency conversions. They're feeling a lot like paypal shady practices forcing you to do unnecessary currency conversions so they can profit off the FX as well. We all know godaddy does deal in $CAD with much of their Canadian business. Not sure why godaddy brokers insist on doing everything in USD...

rlm said:

Oh, one other annoying godaddy issue. Currency. It would be nice if Godaddy brokers would deal in CAD and not force two currency conversions. They're feeling a lot like paypal shady practices forcing you to do unnecessary currency conversions so they can profit off the FX as well. We all know godaddy does deal in $CAD with much of their Canadian business. Not sure why godaddy brokers insist on doing everything in USD...

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Do you have domains listed with Godaddy/Afternic, or are your inquiries from buyers using Godaddy broker service to get them a domain?

Do these domains point to your own landers, and if so why wouldn't the buyers contact you that way? If you ignore Godaddy maybe the buyer contacts you direct, but it's hard not to follow up on inquiries.

What are people's thoughts on selling a .ca to someone outside Canada and not charging GST/HST? I always assume since the buyer needs to have a Canadian presence, then I have to charge GST.

domains said:

Do you have domains listed with Godaddy/Afternic, or are your inquiries from buyers using Godaddy broker service to get them a domain?

Do these domains point to your own landers, and if so why wouldn't the buyers contact you that way? If you ignore Godaddy maybe the buyer contacts you direct, but it's hard not to follow up on inquiries.

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No, not listed on godaddy/afternic. The domains have their own landers with contact forms and although most inquiries come in that way, there's still always some coming in through godaddy. Sometimes they're lame $50 starting offers, to which I don't bother responding. If they make an offer with at least 4 digits, I'll usually at least respond.

You would assume that if you don't respond to godaddy that they'll try to contact you directly. Sometimes they do and some times they don't...

rlm said:

You would assume that if you don't respond to godaddy that they'll try to contact you directly. Sometimes they do and some times they don't...

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Sorry to have to say this but...

I once called somebody a retard when the domain was pointed at my lander and they repeatedly inquired from a marketplace. The offer was under my $1000 minimum so I did not respond. Eventually I got a nasty email and I usually stay pretty cool but this guy was beyond nasty so I responded and called him a retard.

I said if a Toyota dealership advertises in the newspaper do you make it a habit to go to a Honda dealership and ask them to get the car for you. I said if you're not smart enough to know how to acquire a domain name you are probably not smart enough to know the value of the domain so negotiating would be futile.

Not one of my best moments but this guy kinda ticked me a bit.

MapleDots said:

Not one of my best moments but this guy kinda ticked me a bit.

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it happens...

It's an in and out journal entry for GoDaddy and has to be based on the end users address. Failure to comply would hold all parties responsible during a tax audit.

On the flip side, I do know from experience that if I buy ANY domain via Afternic, regardless of who owns the domain, I get charged HST by GoDaddy. In other words, if I buy a premium domain that is listed on Afternic, that is owned by a third party, including third parties who are not in Canada, I get charged HST on that purchase by GoDaddy. Weirdly, if I were to buy that same domain if it were listed on Sedo, I am not charged HST.

BillSweetman said:

On the flip side, I do know from experience that if I buy ANY domain via Afternic, regardless of who owns the domain, I get charged HST by GoDaddy. In other words, if I buy a premium domain that is listed on Afternic, that is owned by a third party, including third parties who are not in Canada, I get charged HST on that purchase by GoDaddy. Weirdly, if I were to buy that same domain if it were listed on Sedo, I am not charged HST.

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That seems like potential tax fraud to me too. Godaddy's position needs to be clearly defined in every transaction as either the seller, or the broker, and that should be made clear to both the buyer and the seller, up front. Taxation would be potentially different for each. One issue with Godaddy is that they don't disclose which domains they own versus which domains they are brokering. And if they are acting as a seller on domains they don't own, then who knows if they're jacking up the price way above the agreed broker percentage of 20% or whatever it is.

As mentioned previously, I've had a Godaddy broker try to tell me I was selling the domain to them and therefore there was no tax due (as an US Corp). To me, that's not acting as a broker, and depending on how they handle the re-sale to the buyer, it could also be tax fraud.

I have just completed a transaction where Godaddy brokered it, but I insisted that taxes were due and that I could not tell them the amount without the buyer's billing address. Taxes can range from 0 to 15% depending on their billing address, so I don't want to over-charge, nor under-charge. And I need documentation to prove I'm being tax compliant. So after much back and forth with the broker getting everyone to agree to it, it was settled like this:

1. The price paid via godaddy was my asking price PRE-TAX.
2. the buyer agreed to pay any applicable taxes due AFTER the transaction.
3. After the transaction completed, the broker shared our contact information with both parties.
4. I then invoiced the buyer for the appropriate tax portion still due.
5. They've agreed to pay to pay me directly.

Obviously this took some trust from both the buyer and the broker, but it appears to have worked out fine.

It's certainly not how I'd like to do this every time I make a sale through godaddy. Hopefully they find some way to handle the tax issues when a buyer and seller are not known to each other. I'd love to get Godaddy finance/legal involved so this can be done properly going forward. @jamesiles ??

I don't know about this issue, but in general I question GoDaddy's competency when it comes to tax matters.

They reported some of my business income as personal income.

They messed up my (and others) 1099-K forms and had to re-issue them.

Then, I have heard of them issuing 1099-K on Paypal payments. That makes no sense as Paypal issues them.

So, you could be in a situation where the same income is double reported.

Brad

So I had a transaction recently using a godaddy broker where the buyer agreed to pay me the HST due AFTER the completion of the transaction. The godaddy broker got the buyer to agree to this, I trusted him and accepted the deal without taxes, and sure enough, once the transaction completed, he passed on the buyer's details and I invoiced them for the taxes due, and they paid. Although I took a risk assuming the buyer would actually pay it, it worked out, they paid, and I was happy to know that taxes were paid & I'll be remitting them to CRA. And they buyer could use my invoice to claim the HST back as an Input Tax Credit - they way the system is supposed to work. And the buyer then didn't have to pay the godaddy commission on top of the HST too.

However, today I had a different GoDaddy broker tell me that Godaddy would be "buying" the domain (a different domain) from me, and "reselling" it to the buyer. Therefore, I wouldn't charge Godaddy taxes, and that Godaddy would charge taxes due.

I'm not sure I believe that - leaving me potentially liable for taxes. Not to mention, can you even legally call yourself a broker if you're "buying" and then "reselling" ???

For example, if godaddy brokerage is claiming they are a US company and therefore I shouldn't charge them taxes, I sell it to them, then if Godaddy USA then sells the domain to a Canadian, then taxes wouldn't apply again. No taxes paid. However, if I had sold it directly to the buyer, taxes would have been applied. So this whole route by Godaddy seems like tax avoidance - especially because I know they have multiple registered corporations in Canada.

Maybe this is legal, I don't know, but I am suspicious for sure. I'd sure like to hear a real answer from an official godaddy rep / executive. And I'd sure like to start getting the same story from every broker, rather than a different story from every broker.

I've had some success over the years with Godaddy brokers. And although I think its crazy for buyers to pay those commissions, the broker does play a role and sometimes earn their commission by helping convince the buyer its actually worth the price. Sometimes a buyer needs that supposed independent opinion to help convince them. But I'd really like to see a real godaddy response to this tax issue, to settle this once and for all.

@jamesiles ?

Thanks.

rlm said:

However, today I had a different GoDaddy broker tell me that Godaddy would be "buying" the domain (a different domain) from me, and "reselling" it to the buyer. Therefore, I wouldn't charge Godaddy taxes, and that Godaddy would charge taxes due.

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If you're not the guy invoicing then you don't have to worry about the sales tax.

Technically the first broker above is correct, you are selling to godaddy because the buyer gets billed and payment actually goes to godaddy not you. Godaddy then removes the commission and pays you the difference. At no point in time did you have contact with the end user, in fact you don't even know who the end user is.

So godaddy should be charging the sales tax if they are billing from within Canada, which they are not because they are charging is US dollars.

Again, the broker above is/was correct

The situation becomes much more messy when dealing with a Canadian Company like DomainEasy




With their contact info in Canada taxes would have to be charged by you or domaineasy if the sale was to a Canadian end user.