For Sale Warning for Sedo sellers of .ca domains

[msn]

We had an offer on a domain registration through Sedo and the buyer appeared to have accepted our counter offer.

Sedo then produced a sales contract for the transaction listing the buyer as a U.S. company and as being free of any Value Added Tax, otherwise better known as GST and or HST.

When the transfer was made - against our wishes, I will add - it was made directly to a Canadian company on Webnames.ca. This means the intended sale was directly to another Canadian company, and GST, or in this case HST, applies.

The problem is the Sedo contract states that GST/HST is to be paid only by the seller, out of your agreed price, which clearly goes contrary to their statement of being exempt.

If you do not want to be hit with a 15% liability for HST you might want to think twice about Sedo.

 

[Gerry]

Sedo is getting quite comfortable screwing over people and make sh+t up as they please.

 

[msn]

It would appear that they have a very close working relationship with major buyers, and that could mean we are not getting a fair shake from Sedo when they favour the big buyers over us.

 

[hugegrowth]

does HST only apply if you have more than $30,000 in annual sales?

 

[msn]

does HST only apply if you have more than $30,000 in annual sales?

Who cares what the seller has as sales? If the buyer claims it is exempt when it is not exempt, then things can get serious for the buyer, even when Sedo weasels out of it with a clause in the contract based on demonstrably false information.

 

[6sons]

On the issue of the tax I think you can rely on the sales contract when reporting since you should not be required to "look behind" it as far as rev can is concerned.

 

[msn]

Their contract is an issue since it explicitly states the seller has to pay VAT from the proceeds, and if you know the buyer is from outside Canada, there is no problem. But here the buyer/transferee is clearly a Canadian entity, so you have then a duty to report on this.

 

[draggar]

Wow, talk about shady and giving buyers an advantage.

Well, just increase your prices to cover the HST?

 

[6sons]

I had the same situation made under different circumstances - contract - US buyer named on contract - accordingly no gst added or collected - but registered to their Canadian affiliate with my full knowledge since I had to approve the transfer through Cira. I did not collect or remit any gst and our accounting treatment stood up to a gst audit.

 

[msn]

This contract shows the buyer as "not disclosed" so it looks to be out and out avoidance, and one has to wonder how the contract can even be valid without a counter-party.

 

[TheLegendaryJP]

Here is what baffles me about you guys.. how is it you think any .ca transaction could be void of gst/hst to start with, regardless of what sedo says. ALL .ca sales are taxable since ALL .ca sales should be to a Canadian presence, ( dependng on province of course, I think 3 are exempt?)

 

[msn]

Here is what baffles me about you guys.. how is it you think any .ca transaction could be void of gst/hst to start with, regardless of what sedo says. ALL .ca sales are taxable since ALL .ca sales should be to a Canadian presence, ( dependng on province of course, I think 3 are exempt?)

Finally the voice of sanity!

Exactly - everyone has to pay at least 5%, being GST, and some must pay more for HST, with the only possible exemptions being a registered trade mark holder based outside Canada with a valid registration at CIPO or a provincial or territorial government itself.

Sedo is not the buyer, and if you think they are going to help you if there is trouble, think again.

 

[Provider]

LegendaryJP is right. MSN shouldn't be surprised that .ca was sold to Canadian, because there is no other valid buyer. Every domain name sold from Canadian to Canadian should be including HST or GST. My accountant asked me why I am not charging GST on my sales, I said to him that when I sell the domain name, I have no idea about buyers GEO location. As I understand we can ask people to pay HST/GST but if they refused, than we can point that out on the invoice. I can't let the deal fail, because the buyer's refusal to pay the tax. Maybe I am obligated to collect, but what if I can't do that? Interesting topic though

 

[TheLegendaryJP]

Our great country will find you liable for that tax should the buyer refuse, after all you didnt have to sale the name to them.

I remember and so would Wayne when a commercial lease had a business tax that the owner collected and paid to the gov. That tax was not always easy to collect and the gov. decided to stick it to the landlord and find them liable should the tenant disappear. The bottom line is the gov. will get their money and it will be from you, no excuses.

 

[6sons]

Here is what baffles me about you guys.. how is it you think any .ca transaction could be void of gst/hst to start with, regardless of what sedo says. ALL .ca sales are taxable since ALL .ca sales should be to a Canadian presence, ( dependng on province of course, I think 3 are exempt?)

Like I said in an earlier post we sold a domain under contract to a US company that took possession in the name of their Canadian affiliate. Gst was not colllected or remitted and our accounting treatment stood up to a Rev Can audit. How they hold it is their business as far as rev can is concerned since you have no control over how they may want to hold the asset. I went by the contract and so did rev can which was a sale to a US company and payment directly from a US company. As an aside, I I did have a clause that stated the buyer would be liable should gst become payable. With this you take a chance I know but I was dealing with one of the biggest companies in the world.

 

[TheLegendaryJP]

I did have a clause that stated the buyer would be liable should gst become payable

I know you are smart Wayne

That only leads me to ask ( since it held up to an audit ). I understand selling the name to an out of country buyer and receiving payment from them would make the DOMAIN deal gst exempt BUT... since we know a .CA can only be registered to a Canadian presence are we now saying that as long as we receive payment from outside of Canada for the purchase of a .CA ( eventhough we know they need to be registered to a Canadian presence and therefore automatically subject to taxation depending on province ) we avoid gst each time?

I ask only because you, I and CIRA know this but is it possible the ignorance of Revenue Canada is what made that sale gst exempt? If Rev Can knew or knows only Canadians can own a .ca, wouldn't you think they would be more vigilant?

Not saying don't CYA as Wayne did or rely on this one case as reason alone, just throwing that out there... a lot of us live near boarders. Personally I rather be on the side of caution and be;lieve since ONLY Canadian presences can own a .ca that all sales are subject, jmo.

 

[6sons]

Ignorance is a possibility but consider this. For their own reasons they want to pay by their US parent and they can hold legally in their Cdn company. Since the US company is not a HST rant, nor could they even become one, they would have no way to recover the tax paid as an ITC. On the other hand nothing is really lost because the tax is a flow through. (If they were a rant then I would collect and submit - they would pay and get back) = no tax paid anyway. This is what happens at the B2B level. The real revenue stream begins when the product or service reaches the consumer. This is where Rev Can has the heavy boots.

---------- Post added at 10:40 AM ---------- Previous post was at 10:37 AM ----------

My accountant asked me why I am not charging GST on my sales, I said to him that when I sell the domain name, I have no idea about buyers GEO location. As I understand we can ask people to pay HST/GST but if they refused, than we can point that out on the invoice. I can't let the deal fail, because the buyer's refusal to pay the tax. Maybe I am obligated to collect, but what if I can't do that? Interesting topic though

In a Cdn to Cdn sale you have to collect either GST or HST based on buyer location. If you dont your sale is deemed to include the tax anyway. If you decide you can work with this (because you dont want to lose the sale) then it is prudent to enquire as to the province they are located so that you can know your obligation. I have previously posted a breakdown of this tax obligation on an HST thread, but here it is:

Alberta, Manitoba, Nunavit, NWT, Prince Edward Island, Quebec, Saskatchewan, Yukon 5% GST
British Columbia 12 % HST
New Brunswick, Newfoundland, Labrador, Ontario 13% HST
Nova Scotia 15% HST

If you cannot gain the province of the buyer and cannot prove it either I suppose you may have to expect the worst from Rev Can.

 

[msn]

Like I said in an earlier post we sold a domain under contract to a US company that took possession in the name of their Canadian affiliate. Gst was not colllected or remitted and our accounting treatment stood up to a Rev Can audit. How they hold it is their business as far as rev can is concerned since you have no control over how they may want to hold the asset. I went by the contract and so did rev can which was a sale to a US company and payment directly from a US company. As an aside, I I did have a clause that stated the buyer would be liable should gst become payable. With this you take a chance I know but I was dealing with one of the biggest companies in the world.

That makes trouble for you if they directly transferred your registration into the account of their 'Canadian' business, and here is why: like physical goods, intangible goods are subject to VAT based on where the party takes delivery of the product or service. So if Markmonitor International Canada Ltd. takes the domain directly into its account at Webnames.ca instead of its parent company and a foreign registrar, it most certainly incurred VAT.

Since companies like Markmonitor International Canada Ltd. only exist to hold registrations, they have very low input costs - mainly invoices from Webnames.ca - and no real invoices to end-users since they bill from the U.S. parent to their customers. This means any VAT that Markmonitor International Canada Ltd. would be liable to pay would not have offsets to reduce the amount due. The result would see higher costs for its parent company and the customers of the parent company, so perhaps it is easier for them to avoid the VAT as they appear to do now.

 

[6sons]

If indeed they are a Canadian company all they would have to do is become an HST rant and have an input tax credit and have the entire amount refunded.

By "they" I dont mean a Mark Monitor situation. I am referring to situation like I was involved in. The Canadian affiliate is an Hst rant.

 

[msn]

If indeed they are a Canadian company all they would have to do is become an HST rant and have an input tax credit and have the entire amount refunded.

Sure, if the company is actually operating, but if the company merely exists in a desk drawer somewhere in the United States - or at the offices of Webnames.ca - to skirt CIRA regulations, they will not register if they can help it.