Canada

Quebec's Netflix tax targets non-residents

TAX ALERT  | 

On June 21, 2018, the South Dakota v. Wayfair decision eliminated the physical presence standard for establishing sales tax nexus in the United States. This decision has opened up the possibility for states to impose sales and use tax collection and remittance responsibilities on remote sellers based solely upon their economic presence in that state.

While the Canadian federal government has yet to weigh in on the subject of the taxable status of digital transactions, the Ministry of Finance of Quebec recently enacted changes to its sales tax legislation.  As with the U.S., the Ministry has focused its attention on non-residents of Quebec that do not have a physical presence in the province. Quebec will now tax Netflix, Amazon and other U.S. streaming services (now referred to as “Netflix” tax). At this point, there is no plan for the federal government to align the GSTS/HST legislation with Quebec; this is thought to be a reaction to Netflix agreeing to invest $400 million USD in local Canadian TV series.   

The new legislation requires certain non-resident businesses of Quebec making taxable sales exceeding $30,000 CAD a year to “specified consumers” to register with Quebec Revenue Agency, and collect Quebec Sales Tax (“QST”).  A “specified consumer” is generally an individual that is resident in Quebec and that is not registered for QST purposes. While taxable supplies generally include the provision of digital supplies and services, under certain circumstances, the provision of tangible personal property (goods) may also trigger a registration requirement.

Operators of digital platforms (e.g., Apple, Audible, Electronic Arts, Expedia, Facebook, Google, Netflix, and LinkedIn) that provide or enable the sale of services and digital property such as movies, books, and music downloads/streaming to specified consumers in Quebec are also required to register, and collect QST on sales made through the platform.

The registration requirements for non-residents of Quebec that have no physical or significant presence in Canada became effective on Jan. 1, 2019, while the registration requirements for non-residents of Quebec that have a presence elsewhere in Canada will become effective on Sept. 1, 2019.

Non-resident businesses that may be affected by the new Quebec legislation should focus on determining whether they are required to register, and if so, register, collect, and remit tax as required.

RSM CONTRIBUTORS


Subscribe to our newsletters

Subscribe


HOW CAN WE HELP YOU?

Contact us by phone +1.855.420.8473 or submit your questions, comments or proposal requests


CONTACT

Maria Severino

National Tax Leader


Recent Tax Alerts

New trust reporting on hold but beware of not filing

With filing season upon us, the CRA clarified the new trust reporting rules will not be in force for the 2021 taxation year.

  • January 19, 2022

Global minimum tax is taking shape

The OECD released its model to implement a coordinated international tax system in which MNEs will be subject to a 15% global minimum tax.

  • January 06, 2022

Are you ready for Canada's Digital Services Tax?

The federal government released the draft Digital Services Tax Act proposing a 3% tax on revenue earned from certain digital services.

  • January 03, 2022

Federal economic and fiscal update

The Canadian government provides an overview of Canada’s finances, unveils the areas of focus, and sets out proposed new tax measures.

  • December 15, 2021

Loblaw Financial: SCC considers FAPI does not apply to foreign bank

The Supreme Court of Canada provides a welcomed decision and clarifies rules for FAPI in the foreign bank context.

  • December 07, 2021