The growth of the “sharing economy” is enabling new forms of business organization, characterized by a proliferation of small sole-proprietor businesses carried on through a centralized Internet platform. These structures pose new interpretive and compliance challenges for the tax system. The “Uberization” of the taxi industry is one example of such a structure, and shows the complexities that can arise…

Under general GST/HST rules, most suppliers in the sharing economy would be eligible for the small-supplier exemption (applicable to persons who sell no more than $30,000 in goods and services during the year) and would not be required to register for or collect GST/HST. However, subsection 240(1.1) of the ETA specifically requires registration and collection by any supplier carrying on a “taxi business,” regardless of the small-supplier exemption. For this purpose, subsection 123(1) defines a “taxi business” as “a business carried on in Canada of transporting passengers by taxi for fares that are regulated under the laws of Canada or a province.”…

What is a ride-sharing driver in.. [Canada] to do? It appears that the safest approach is for a driver to (1) register for GST/HST purposes specifically as an operator of a “taxi business” pursuant to subsection 240(1.1) and section 171.1 of the ETA, (2) provide clearly visible notice to riders that taxes are included in the fee (as required by regulation 2(1) of the Disclosure of Tax (GST/HST) Regulations), and (3) remit a portion of the fees that he or she receives on account of the tax. But this approach is bound to be unpopular, since the drivers do not set their fees and would effectively be remitting the taxes from their own pockets.

Except from:  Taxis, Taxes, and the Complexity of the Sharing Economy, Canadian Tax Focus, Volume 7, Number 1, February 2017.  www.ctf.ca