Canadian cash is on the verge of being obliterated.
The COVID-19 pandemic has dramatically changed many of the ways consumers shop and pay for goods these days.
A new report by FIS, a leading provider of technology solutions for merchants, banks, and capital markets firms globally, says there has been a decline in the use of cash in Canada, which halved in 2020 and is expected to drop to just four percent of in-store payments by 2024.
Dan Brames, Executive Vice-President of North America Merchant Solutions at FIS, said there has been a rise in the use of digital wallets as a means for online purchasing, growing faster than any other form of payment.
Dan Brames
Also, buy now, pay later services are rising by 78 percent, accounting for 1.6 percent of e-commerce spending.
Part of the decline in cash is due to COVID-19 pandemic.
“But setting that aside, even without COVID, obviously we were starting to see less use of cash whether that’s in the U.S., Canada, the UK — pick your geography. And some of those like the UK are further ahead than even North America. It’s predominantly due to a population now that is becoming more of the buyers of goods that are more comfortable with currencies other than cash — in other words contactless and mobile payments,” said Brames.
“If you look at the acceptance whether that’s online or whether that’s at point of sale, the acceptance of the technology is finally catching up. So it’s not that probably consumers haven’t always wanted to use something other than cash but now it’s so darn convenient, it’s so widely accepted that I think we’re starting to see the catch up effect, if you will, of the acceptance of technology.”
COVID’s impact on the use of cash is due to some people not wanting to handle physical money for fear of perhaps being exposed to the virus. Also, some stores were not accepting cash during the past year for health and safety reasons.
In a few years of the pandemic, everyone started using dozens of payment systems at once. Sometimes it becomes difficult to control your expenses separately from each other. The company Corefy has developed a service that combines hundreds of payment systems in a single application. The integrated payment systems are set up in a few clicks.
The increase of the money limit that could be used for contactless payment has also had an impact on the growth in that use.
“COVID was good in the respect that it accelerated a lot of the use of the technology that had always been there, it’s just maybe there wasn’t a strong of a use case now coming out of COVID,” explained Brames.
The increasing use of technology in paying for goods is also good news for retailers and restaurants as people tend to spend more money than they would if they were using cash.
“Psychologically the idea of laying down cash versus using credit or debit is different. So you’ve got a lot more of what we would call ticket lift where people have the ability and probably will spend more than they would if they were laying down the hard cash,” said Brames.
The annual Global Payments Report by Worldpay from FIS examined current and future payment trends across 41 countries. Findings from the 2021 report show that lockdowns, shelter-in-place orders, and personal safety measures during the global health crisis accelerated the shift toward digital payment methods in every area of consumer spending.
Some key findings from the report include:
Use of mobile wallets exceeded cash for in-store payments for the first time. Globally, cash usage dropped 10 percentage points in 2020 to account for just one-fifth of all in-store payments, behind credit cards (22 percent of in-store payments), debit cards (22 percent) and mobile wallets (26 percent);
Use of cash for in-store payments fell by half or more in Canada, the U.K., France, Norway, Sweden, and Australia;
The report projects that by 2024, cash will account for less than 10 percent of in-store payments in the U.S. and just 13 percent of payments worldwide. Over that same time period, the report projects digital wallet payments to account for more than a third (33 percent) of all in-store payments (16 percent in the U.S.);
Total e-commerce spending grew globally 19 percent last year to $4.6 trillion in value. That growth was the highest in the past five years and represented two-to-three years of typical acceleration in a single year. Analysis shows global e-commerce spending could grow to $7.3 trillion by 2024; and
Usage of digital wallets (45 percent) eclipsed credit cards (23 percent) for the largest share of e-commerce transactions. The growth of digital wallet-based transactions for e-commerce transactions in 2020 equated to three years’ worth of growth in a single year.
Jim Johnson
“Our new research shows that the world is entering a new phase of adoption of digital payment methods,” said Jim Johnson, Head of Merchant Solutions at FIS. “The global pandemic has brought a cashless future closer on the horizon. The implications for merchants are profound. They must be building technology-centric strategies to meet the diverse preferences of consumers’ rapidly changing habits and do so in a way that drives financial inclusion for underserved communities around the world.
“For those businesses that are savvy enough to embrace smarter commerce and invest, the growth opportunities will be huge and potentially game-changing.”
Exterior of Gucci at West Edmonton Mall. Photo: Gucci
Italian luxury brand Gucci has opened its third standalone Canadian location at West Edmonton Mall in Edmonton. The store is part of a continued Canadian investment for Gucci which has included new stores and renovations.
The West Edmonton Mall Gucci store spans 5,040 square feet on one level and is located in what is becoming a ‘luxury run’ in the mall. Gucci is strategically positioned between a Louis Vuitton store that opened in the summer of 2019 and a Saint Laurent storefront that opened in December of 2020. Tiffany & Co., which opened in 2013, is located across the way.
Gucci opened at the the end of March at West Edmonton Mall and the store has been busy from day one. On Saturday March 27, a reader informed us that a lineup to get into the store was more than a three hour wait, and sales were being made.
The store carries a standard selection of Gucci bags, footwear, accessories, jewellery, silks, watches, fragrances, and eyewear. Given the vast space in the new store, sections have been created including footwear boutique spaces for men’s and women’s shoes. One reader noted that some of the ‘new’ collections found in Gucci stores in markets such as Vancouver and Toronto are not yet carried in secondary market stores such as Edmonton.
1 of 5
Interior of new WEM Gucci store showcasing men's shoe boutique. Photo: Gucci
Interior of new WEM Gucci store showcasing men's shoe and accessory boutique. Photo: Gucci
Interior of new WEM Gucci store showcasing women's bag and accessory boutique. Photo: Gucci
Interior of new WEM Gucci store showcasing women's shoe and accessory boutique. Photo: Gucci
Interior of new WEM Gucci store showcasing women's bag and accessory boutique. Photo: Gucci
Some shoppers recently interviewed by Retail Insider noted with some disappointment that the West Edmonton Mall store does not carry Gucci’s ready-to-wear clothing as many had expected given the size of the space. We’re told that Gucci will look to do trunk shows with ready-to-wear items to test the market and that the fashion collections may be brought in at a later date if there is demand. The store currently lacks dressing rooms to try items on which means that modifications to the space would be needed.
The store’s interior is attractive and similar to other updated Gucci stores in Canada. Velvet armchairs contrast with hard surfaces and industrial elements such as rivets. Artisan painted floors were handcrafted in Italy with optical patterns that are integrated with herringbone wood flooring. Other design elements include sage green velvet upholstery, and vintage oriental rugs. Toronto-based dkstudio Architects Inc. designed the West Edmonton Mall space.
Gucci was one of the top brands at the former Holt Renfrew store in downtown Edmonton which closed in January of 2020. Gucci handbags and shoes are said to have sold more than $3 million annually at Holts in Edmonton, prompting Gucci to maintain a presence in Edmonton after Holts shut. The manager of Gucci’s Edmonton concession, Kyle Goodwin, is now running the West Edmonton Mall Gucci store after a brief stint at Hugo Boss.
West Edmonton Mall is securing several of the top brands that were once available at Holt Renfrew in Edmonton, prompting them to open standalone stores. In the summer of 2019, Canada Goose opened a large standalone store at West Edmonton Mall, and Tiffany & Co., formerly only available at Holts, opened its West Edmonton Mall store in 2013.
Other brands carried at the former Edmonton Holt Renfrew store could look to West Edmonton Mall as well, including the likes of Burberry and Max Mara.
The West Edmonton Mall Gucci store is the brand’s only standalone location in Alberta. In Calgary, Gucci operates three concession spaces within the downtown Holt Renfrew store which includes an accessory boutique on the street level, a women’s ready-to-wear boutique on the second level, and a men’s Gucci area on the third floor.
In Canada, Gucci operates two standalone stores as well as several concessions. The first standalone Gucci store in Canada opened in the year 2000 at 130 Bloor Street West in Toronto in a 6,500-square-foot space that recently saw a full renovation. A second Gucci store opened in 2006 in Vancouver at the Fairmont Hotel Vancouver, spanning 3,875 square feet — the store will be renovated next year. Gucci’s other locations in Canada are located within Holt Renfrew and Nordstrom stores. In Vancouver, Gucci operates concessions at Holt Renfrew, including separate shops for bags/accessories as well as women’s and men’s apparel. Holt Renfrew’s Calgary store, as mentioned above, features the brand in concession spaces.
Interactive WEM map with red arrow pointing to the new Gucci location.
In Toronto, Gucci operates its large concession at Holt Renfrew in Yorkdale as well as separate bag/accessory and apparel boutiques at Holt Renfrew on Bloor Street. Nordstrom’s CF Toronto Eaton Centre store features a main floor Gucci bag and accessory concession. In Mississauga, Gucci operates a bag/accessory concession at Holt Renfrew. In Montreal, Gucci operates concession spaces at Holt Renfrew Ogilvy for bags/accessories, women’s apparel, and men’s apparel. The store also features Gucci boutiques for men and women. Gucci shoes and belts are also carried at Nordstrom and Saks Fifth Avenue stores in Canada.
In years past, Gucci’s Canadian distribution was primarily in Holt Renfrew stores. In the early 1990’s, Holt Renfrew in Edmonton housed a Gucci boutique space (most recently occupied by women’s shoes) with a mall-facing entrance carrying bags and accessories. Holt Renfrew also operated Gucci bag/accessory boutiques in its other stores including a particularly large selection in Toronto and Montreal.
Gucci is marking 100 years this year — the brand was founded by Guccio Gucci in 1921 and the brand now has over 500 stores and concessions globally with revenues in excess of USD $10 billion annually. The brand is now under the creative direction of Alessandro Michele, and Marco Bizzarri is currently President and CEO of the company. Gucci is owned by global luxury group Kering. In the United States, Gucci operates a network of standalone stores as well as boutique spaces in stores such as Neiman Marcus, Saks Fifth Avenue, Bloomingdale’s, Nordstrom, and Macy’s in Manhattan.
This week, Nordstrom opened a Dover Street Market concept store at its flagship location at CF Pacific Centre in downtown Vancouver. The pop-up will remain open for six weeks. The Dover Street Market concept, located in Nordstrom’s second floor SPACE department, features all seven individual brands under the Brand Development Branch of the Dover Street Market Paris. Pieces from collections are also available now on Nordstrom.ca.
Vancouver is one of only three Nordstrom stores to see the Dover Street Market partnership, with the other two being at Nordstrom’s Manhattan flagship and at the Grove Nordstrom store in Los Angeles. Artist and furniture designer, Marc Hundley, designed the spaces.
Brands at Nordstrom’s Dover Street Market pop-up include Vaquera, Rassvet, Weinsanto, ERL, Liberal Youth Ministry, Honey Fucking Dijon, and Youths in Balaclava. Fashions for both women and men are included as well as gender-neutral styles priced from $30 up to $2,285.
1 of 6
Inside the Dover Street Market pop-up in Nordstrom Paris' SPACE department. Photo: Melissa Hom
Inside the Dover Street Market pop-up in Nordstrom Paris' SPACE department. Photo: Melissa Hom
Inside the Dover Street Market pop-up in Nordstrom Paris' SPACE department. Photo: Melissa Hom
Inside the Dover Street Market pop-up in Nordstrom Paris' SPACE department. Photo: Melissa Hom
Inside the Dover Street Market pop-up in Nordstrom Paris' SPACE department. Photo: Melissa Hom
Inside the Dover Street Market pop-up in Nordstrom Paris' SPACE department. Photo: Melissa Hom
Nordstrom operates two edgy unisex SPACE departments in its Canadian stores including the Vancouver location as well as Toronto’s Yorkdale Shopping Centre. Nordstrom also launched SPACE at its CF Toronto Eaton Centre store when it opened in September of 2016 but it has since shut.
The partnership is a first of its kind for Dover Street Market, which is wholly owned by Comme des Garçons and created with the goal of bringing emerging brands to market. Dover Street Market was founded in London in 2004 by Rei Kawakubo and the retailer has stores in London, New York City, Los Angeles, Tokyo, Singapore, and Beijing. A smaller store and perfume boutique are located in Paris. A full-line store was recently announced for Paris as the retailer expands its operations. Dover Street Market’s standalone stores typically span in the 15,000-square-foot to 30,000-square-foot range.
It is unclear if Dover Street Market would consider opening a standalone store in Canada. The multi-brand concept has been wildly popular since being founded 16 years ago and is considered to be one of the ‘cool’ multi-brand retail chains sometimes spoken of in the same sentence as Milan’s 10 Corso Como, Dallas’ Forty Five Ten, the former Colette in Paris, as well as Miami-based ‘The Webster’ which will open its first Canadian store on Scollard Street in Toronto’s Yorkville area this year.
For years, retailers, mall owners, and business improvement areas have been turning to the same types of data from the same sources to make the same types of sales predictions. But 2021 turned the life of retailers and mall owners upside down and inside out. If ever there was a time to look for new awareness, it’s now.
The usual way of understanding a place has become as formulaic as ordering a pizza. Stats Can census data are your base. Mobility data are the sauce. Daytime population estimates are the cheese. From data providers, you can pay a lot more for extra toppings like insights from surveys. But you can never be sure how fresh those insights are, how well sourced, or whether they are organic or extrapolated from a can.
The problem is that grasping the health, interconnectedness, and poetry of city life has zero in common with making a pizza. After all, what does census data from before COVID times tell us about life today? What do surveys on consumption from 2020 tell us about how, where, why, who, and when people currently are shopping and spending time? How do such stale tools assist Main Street Davids compete with Goliath’s like Amazon?
If we are going to help our great Canadian public spaces such as malls and main streets recover, we have to be frank that analytics we’ve been ordering – while comprehensive and intermittently easy to apply – don’t tell us a great deal about inflection moments like these when cities and consumer behaviours are being reshuffled.
Happily, big advances in data innovation and digital technology are revealing new evidence-based means to make investment decisions based on what matters to people. If we look at hard data from across Canada and Europe, the most successful places turn out to be those which are safe, engaging, and have a magnetic diversity of uses and attractions.
Using geo-social data, Citiscope measures how diverse, exciting, safe, and engaging spaces actually are. We use machine learning to create esoteric tools that capture what people actually like about the places that they visit.
In essence, we’ve turned billions of social media posts about settings and places into an analytic tool that can help you improve visitor experiences and so promote communities that are more sustainable and liveable.
We identify the quantitative and qualitative strengths of your address by focusing on what people love about them. With that deep dive into community lifestyles, you’re able to compare property dynamics of malls or main streets across the same city or region.
For instance, visitors to a neighbourhood often have a hard time experiencing the optimal ambience just by checking a map or using a trip rating site. Citiscope can help visitors improve their shopping experiences by measuring the intensity of social activities that happen in a mall or on a main street. We also score streets based on certain old-timey geo-spatial points of interest data like footfall to shops with newer insights derived from, say, robustness of digital footprints of businesses, numbers of events, accesses to public space, even quality of air.
We see shops, main streets, and malls as existing within a super-local ecosystem that integrates destinations where the attractions of all boost or rub off on each other.
We can also help you create a baseline for retail strategizing so that you can view impacts over time. That can make positive differences as our long COVID winter finally begins turning into something more hopeful, roaring, and exciting.
*Retail Insider partnered with Citiscope for this article.
Dorn Townsend
Citiscope was founded by Dorn Townsend, a Toronto native whose interest in learning how people engage with cities began after university when he spent a year as a bike messenger in Toronto and Vancouver. He spent years working on urban issues around the world with the UN while he was also contributing to media like The Economist, Foreign Affairs, and The New York Times. The software’s back-end was built by a team of PhDs in math and telecommunications engineering. The platform is uniquely built to take and seamlessly integrate information from different sources including in-house data, Internet of Things, smart-city sensors, and social media.
Voilà has expanded its e-commerce offering to Alberta, with the launch of “Voilà by Safeway Curbside Pickup” setting the stage for its online grocery home delivery service in the province in 2023.
A Customer Fulfilment Centre is currently being built in Rocky View County, just outside of Calgary city limits, to facilitate the future growth. The new facility will create about 1,500 jobs in the province.
“We’re excited to continue investing in Alberta, bringing our cutting-edge technology to Albertans,” said Sarah Joyce, SVP E-commerce, Empire Company Limited. “These new online options will complement the exceptional in-store experience and assortment customers have come to expect of our Safeway, Sobeys, IGA, and FreshCo stores in Alberta.”
Julie Filion, Head of Marketing, ECommerce at Sobeys, said the Voilà concept was launched June 22 in the Toronto market with its delivery business being the first launch in the country.
1 of 2
Voilà by Sobeys delivery truck. Photo: Sobeys
Voilà by Sobeys delivery truck. Photo: Sobeys
“That business model we’re delivering out of the CFC. The Toronto CFC was the first CFC for the delivery-based model. This September we launched curbside pickup as a way to extend our e-commerce offering to more Canadians. We launched in curbside pickup in Nova Scotia as our first market.”
Currently Voilà covers the entire Greater Toronto Area and Greater Hamilton Area for delivery.
“We’re in the process of rolling out curbside pickup for hundreds of stores across the country,” said Filion. “We just launched four (Safeway) stores in Alberta — three in Calgary and one in Edmonton. And we have an additional eight stores in Nova Scotia and you can expect a future rollout of stores across the country in the coming year.”
Safeway curbside pickup locations in Alberta include:
● Safeway Shawnessy – 70 Shawville Boulevard SE, Calgary;
Orders are assembled by Voilà staff and delivered directly to customers’ cars to provide a contactless experience. Local customers can order online at Voilà.ca or by downloading the Voilà mobile app.
At the CFCs, robots assemble orders in an automated warehouse, resulting in minimal product handling, while Voilà staff use enhanced COVID-19 sanitization protocols to deliver orders safely to customers’ homes.
The first centre was established in Vaughan, Ontario. The company’s plan is to have four centres across the country. Another centre is coming in Pointe Claire, Quebec. A previous news release said that facility will be ready to deliver to customers in early 2022. The location of the fourth facility has not been announced. The first centre is 255,000 square feet and each facility’s size will depend on the market they are serving. They will be able to fulfil very large orders very rapidly. They are also huge opportunities for job creation.
1 of 2
Voilà by Sobeys website. Photo: Sobeys
Voilà by Sobeys app. Photo: Sobeys
“Our four fulfiment centres will allow us to serve 75 percent of Canadian households. Our curbside pickup model will be an alternative option where the market density doesn’t justify a fulfilment centre or like in the case of Alberta while we wait for the fulfilment centre to be built,” said Filion.
“This is allowing us to really bring an industry-leading online shopping experience to Canadians. Before the pandemic, and even more so with the pandemic, we have seen an acceleration of grocery e-commerce and this is a solution that Canadian families are looking to have to have increased convenience, a great shopping experience and we partner specifically with Ocado. Ocado is our technology partner.”
In Toronto, the concept is called Voilà by Sobeys. When it is launched in Quebec, it will be called Voilà par IGA and in Alberta it is Voilà by Safeway.
All the brands fall under the Empire Company Limited umbrella which is based in Stellarton, Nova Scotia, with about $28.4 billion in annual sales, $15 billion in assets, and employing about 127,000 people.
A food delivery worker wearing a face mask to help curb the spread of COVID-19 is framed by a large public art installation while riding a bike in Vancouver in November 2020. Photo: THE CANADIAN PRESS/Darryl Dyck
To say it’s been a rough year for the foodservice industry is an understatement.
Restaurants across Canada have suffered immensely from stay-at-home orders, strict in-person seating capacity restrictions and other lockdown measures induced by the COVID-19 pandemic. Ten per cent of Canada’s independent restaurants have already permanently shut down in light of pandemic-related hardships, and recent estimates project that another 40 per cent may not survive beyond March 2021.
Customers sit on a patio at a bar in Toronto on March 20, 2021 — the day restaurants in Toronto and Peel Region were allowed to offer customers outdoor dining. Photo: THE CANADIAN PRESS/Chris Young
To remain afloat during these trying times, many restaurants have relied — often reluctantly — on food delivery applications like Uber Eats, Door Dash and Skip the Dishes, despite recognizing the untenability of the high commission fees they command, some as high as 30 per cent.
In an effort to help restaurants, several provinces have proposed capping food delivery fees and, while laudable, these efforts do not suffice. If the intent is to save restaurants, many of which are deeply woven in the fabric of neighbourhoods and communities across Canada, a bolder solution is needed. The Canadian government must partner with restaurant associations to create its own no-fee food delivery platform.
Monumental Growth
In this past year, third-party food delivery apps have experienced monumental growth and have come to represent a significant share of restaurants’ overall business, making them all the more indispensable during these trying times. These apps work by connecting hungry customers to their favourite restaurants and enable seamless mobile transactions in exchange for a commission fee.
While it may be argued that such apps served as a lifeline for restaurants during the pandemic, many restaurant owners are quick to point out that the increase in delivery app sales did not necessarily translate to higher earnings. That’s because the revenue generated through these apps were largely negated by exorbitant commission fees.
Whatever modest short-term revenue gains restaurants did experience through delivery apps has also come at the expense of their long-term chances of success. At the best of times, restaurants operate on razor-thin margins and simply cannot afford to have delivery apps shave off an additional portion of their revenues.
A food delivery worker rides an electric bike in downtown Vancouver in January 2021. Photo: THE CANADIAN PRESS/Darryl Dyck
Restaurants’ reliance on delivery apps may have been necessary during the pandemic, when trying to avoid bankruptcy. But it cannot be sustained indefinitely, especially if online orders end up permanently replacing those that would otherwise have been made through restaurants directly.
Many have accused food delivery companies of being greedy given how much restaurants have suffered during the pandemic, and have pressured governments to intervene. Heeding to mounting concerns from their constituents, mayors and premiers across Canada passed legislation to cap food delivery charges.
Only Minor Concessions
But unfortunately, these efforts have only led to minor concessions from food delivery apps and are largely regarded as insufficient by Canadian restaurant associations, many of which saw their members lose upwards of 80 per cent of their business at a time when food delivery apps were registering soaring profits.
This sentiment was further echoed by many Canadians who did not place much trust in these temporary measures — nor in bargaining with Silicon Valley-based companies — and did not wish to imagine their cities devoid of the life, vibrancy and diversity that restaurants contribute. To ensure the survival of restaurants, governments must go beyond capping food delivery charges, and must offer a no-fee food delivery platform.
A food delivery man wears a protective face mask to prevent the spread of COVID-19 as he picks up food in Vancouver in December 2020. Photo: THE CANADIAN PRESS/Jonathan Hayward
Admittedly, government agencies are not often top of mind when it comes to app development. But they could easily use a portion of the $1.5 billion promised as part of the federal government’s Regional Relief and Recovery Fund to outsource this task.
Or they could use some of this fund to support existing efforts led by Canadian restaurant associations. The Ontario Restaurant Hotel and Motel Association, for instance, is in the midst of launching a food delivery app in Toronto that promises to charge less than 10 per cent commission fees and expects to expand its services to other jurisdictions in the near future.
Partnering on such initiatives and offering financial support to enable restaurant association-backed apps to reduce their commission fees even further during the pandemic would not only provide restaurants with much-needed relief. It would also prepare them for a future in which app-based deliveries account for a sizeable share of their overall sales.
Apps Are Here to Stay
According to a recent study by researchers at Dalhousie University, 64 per cent of Canadians have ordered food online in the past six months. But even more striking is that almost 50 per cent say they intend to keep doing so at least once per week once the pandemic is over.
Food delivery apps are here to stay, but bargaining with large tech companies or passing temporary legislation to limit their fees will do very little to help the restaurant industry succeed in a post-pandemic world.
Instead, the federal government must support grassroots efforts led by restaurant associations to create a no-commission-fee delivery app option during the pandemic. The fees can later be increased to cover the app’s operating costs, at which point it will hopefully have garnered a large enough base of users to compete with the food delivery giants.
Only then will the Canadian restaurant industry have the tools necessary to ensure its survival both during and beyond the COVID-19 pandemic.
As the COVID-19 pandemic worsened in Canada and worldwide, virus-curbing restrictions meant that merchants and shoppers alike had to get more acquainted with e-commerce. For example, the year-on-year growth spanned from 175% to 625% for Canadian online sales from March to May 2020.
The internet’s reach meant that retailers often sold products to customers that would never shop at a company’s stores in-person, often due to geographical distance. What does that remote selling mean for business taxes this year?
James Peterson, a tax professional with a private practice in southwestern Ontario, who is currently serving as chairperson of the Association of Tax & Accounting Professionals, has some valuable expertise to share.
E-commerce May Go Beyond Browser-Based Sales
First, merchants that pay taxes in Canada must be aware that e-commerce doesn’t only relate to sales occurring via web browsers. Instead, Peterson clarified, “…The federal government defines e-commerce as the delivery of information, products, services or payments by telephone, computer, or other automated media.”
He continued, “Vendors that do not have a website might find themselves subject to the rules around e-commerce, especially when it comes to collecting and remitting sales tax.” In short, Canadian residents must report worldwide sales from e-commerce when filing their tax returns.
However, the situation differs in other countries. Merchants that sell online in the United States must pay applicable sales taxes concerning transactions across state lines. However, each state has different rules about which businesses must collect and pay those taxes.
Merchants in the European Union have new rules for value-added taxes for goods sold via the internet. More specifically, there is a €10,000 threshold for so-called distance sales. Cross-border business-to-consumer transactions up to that amount follow the VAT rules of the supplier’s member state. However, sales exceeding that limit abide by the VAT rules in the recipient’s member state.
Reporting Rules Apply
Most businesspeople know they must follow specific procedures when reporting their income for tax purposes. Otherwise, they could make an error that might make an audit more likely to happen.
Peterson explained, “While all existing tax laws apply to business conducted over the internet, if you earn income from one or more websites, you need to list your five highest-grossing sites and report the total percent of your overall revenue made up by internet sales.”
Online revenue doesn’t stop at website sales. “The definition of a website would encompass a traditional webpage as well as any online platform that is accessed via a computer or a smartphone,” Peterson said. Moreover, Canadian business owners would detail such income on T1 or T2 tax forms, depending on their company structures.
In the United States, what constitutes business income is not necessarily straightforward. For example, a person who paints as a hobby could sell work on eBay and not count that transaction as a business sale. However, U.S. tax authorities determined a hobby turning a profit for three out of five years becomes a business and must file taxes to reflect that change.
However, Americans who used their recent extra time at home due to COVID-19 restrictions to sell used items they no longer want shouldn’t worry about business tax impacts in those cases. Generally, if people use items then sell them for less than the purchase price, they don’t owe taxes on the goods.
How Does the Goods and Services Tax/Harmonized Sales Tax Apply to Remote Sales Targeting Canadians?
Canada has a regime called the Goods and Services Tax/Harmonized Sales Tax (GST/HST). Merchants registered for it must follow the associated rules whether they sell something online or in-person.
“If you are registered for GST/HST, you must collect it on any transactions within Canada, whether the sale is made in-person or over the internet. The requirement to collect GST/HST extends beyond Canadian residents. Non-resident vendors that sell in Canada via [the] phone or internet might be required to register for GST/HST depending on their circumstances,” Peterson noted.
Indeed, as of July 1, 2021, vendors operating outside of Canada with sales exceeding $30,000 CAD to Canadian consumers annually must abide by a simplified GST/HST framework.
The specifics most relevant to the topic at hand are that GST/HST applies to:
Foreign-based digital businesses selling digital products or cross-border services to Canadians.
Transactions associated with foreign companies selling goods originating from fulfillment warehouses in Canada and distributed to consumers in the country.
Getting Tax Guidance Can Bring Peace of Mind
The specifics here cover some general topics that many business owners will find helpful as they get their tax paperwork in order this year. It may prove valuable for the foreseeable future, too, especially with consumers often concluding that buying things online is a convenient solution.
Devin Partida is a writer and blogger, as well as the Editor-in-Chief of ReHack.com
However, anyone who needs further guidance would likely find it worthwhile to get input from a tax expert familiar with their individual situations. Then, people will have the highest likelihood of filing without issues and ensuring they enter the correct information on the relevant forms.
