In the ever increasingly digital age, Manitoba has announced it will expand its collection scope for Manitoba Retail Sales Tax (RST) to online services and platforms effective December 1, 2021. RST might now apply to streaming services, including services like Netflix, Apple Music, Disney +, or Spotify streaming services. Applying RST to streaming services joins the trend of other provinces (Quebec, Saskatchewan and B.C.). How Manitoba will determine the sufficient nexus for digital streaming services is unclear? Does Netflix need a permanent establishment in Manitoba, or are they considered carrying on business in Manitoba? Saskatchewan's Provincial Sales Tax (PST) requires nonresidents of Canada and out-of-province suppliers to register for PST regardless of carrying on business in Saskatchewan or nexus.
The expanded scope will require online marketplaces such as Facebook Marketplace or Kijiji to collect and remit sales tax on the sale of taxable goods sold by third parties on their electronic platforms. The attempt to collect RST on these transactions appears difficult. First, nearly all sales that occur are agreed to via the platform but are paid via cash or electronic transfer. How will Manitoba judge if a sale of taxable goods has even occurred on Kijiji? Sometimes individuals mark the item as sold. The item is almost never sold for the price listed because negotiation is allowed and a primary benefit of these marketplaces. How will Manitoba judge what is the price of the taxable goods? If Kijiji or Facebook Marketplace are obligated to collect RST how will these online marketplaces adapt to these rules?
Online accommodation platforms such as Airbnb or Vrbo will be required to collect and remit sales tax on the booking of taxable accommodations. Taxing accommodation platforms does not have the same quandaries as online marketplaces and streaming services. The determining factor if Manitoba will apply RST is likely if the accommodation is located in Manitoba. The transaction is paid on the accommodation platform via cash; therefore, the RST will automatically be computed and siphoned from the transaction.
Take Aways
These online services will need to register for RST when the rules come into effect December 1, 2021. Online Marketplaces will need to examine the rules to determine their obligations for collecting and remitting RST. Streaming services and online accommodation platforms are better positioned to adjust their fees to take into account RST. If you notice your Netflix subscription costs an extra 7% each month in 2022, the RST might be why. Additionally, the previously announced RST rate reduction from 7% to 6% was supposed to be effective July 1, 2020 has been deferred until further notice.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
