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?
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?
