Taxology - Episode 3: Platform economy and you!

CC (Host): What do you think about when you hear the word platform? A platform: people dance on them, perform on them, and Super Mario jumps on them. And let's not forget, platform shoes are back in style. But platforms also refer to the websites and apps we use every day, and some that help us buy and sell goods or services.

The internet has allowed people all over the world to make money using these platforms. It's bringing you home after a night out with a rideshare, or delivering your favourite late night snack to your door. Mm, that's poutine with extra gravy for me. It's also selling your pet related arts and crafts online, and paid content subscriptions of all kinds. This is what it means when people talk about the platform economy, and it has an effect on your taxes. 

Hello and welcome to Taxology, the new podcast from the Canada Revenue Agency where we talk about taxes, bust myths, and share what we know so that it's easier for you to do your taxes. I'm your host, CC, and on today's episode we'll be talking about the platform economy.

Joining us on the show today is Vikram who works in digital compliance, and he’s going to share his knowledge so that you can know more about the jobs that are considered part of the platform economy, and what that means for your taxes. Maybe you're part of the platform economy and you didn't even know it, so let's move right on into it.

Tell us a bit about your job, Vikram. 

Vikram: Platform economy section is a relatively new area. We're focusing on compliance initiatives that will help taxpayers across the country understand their tax obligations when it comes to platform economy activities. And what I mean by platform economy activities is anything that taxpayers can do online to generate income.

And nowadays it includes a lot of different things such as the sharing economy, the gig economy, peer-to-peer selling economy. And last but not least, the social media influencer economy. 

CC: Okay, so let's define all of them, because I don't understand. What is “sharing economy”?

Vikram: Yeah, so the sharing economy is essentially providing sharing services through platforms and online websites.

Examples of the more common platforms can include Uber and Airbnb. So under the sharing economy, there's ride sharing and then accommodation sharing. And as I mentioned the examples of Uber will fall under ride sharing and Airbnb would fall under accommodation sharing. And essentially what you're doing is you're using your personal assets to generate income through sharing those assets.

CC: Okay. So if I had a room to rent out to a roommate, is that sharing economy? 

Vikram: Technically it could be if you are using a platform to do that, and it would be a short term arrangement between your roommate and if you were doing a more long-term rental arrangement, then it would not technically fall under platform economy. It’s typically short-term accommodation based contracts. 

CC: Okay. And then what is gig economy?

Vikram: Yeah, so the gig economy, it can span a lot of different skill-based services. And essentially anybody who is skilled in a specific, any sort of key, you know, skill that they have. Whether it's online web design or whether it is a technical, electronics based skill that they have, or a construction business, they can use their individual skillset, promote them online and have a sort of gig based work that they're using to generate their income.

So platforms such as Fiverr, Jiffy, TaskRabbit are common gig economy platforms, and the contracts that are created through gig economy include short-term temporary contract based work where you find clients online and they are able to hire you for any sort of particular work.

CC: So if I was a piano teacher, maybe, or babysitter. 

Vikram: Yeah, absolutely. It could be really anything. It can be a piano teacher, any sort of music teacher. It could also be a babysitter, it could be a dog walker. Any sort of skillset that you have, you can promote online through these platforms. And a lot of times people are also doing lawn care, plumbing services, trade-based activities as well. And other times it could be something simple as putting together furniture that people have purchased from big box stores.

CC: Oh my goodness, those are so impossible to put together.

Vikram: Yeah.

CC: I would totally pay someone to do it. 

Vikram: Mm-hmm. Absolutely. 

CC: What is peer-to-peer selling then?

Vikram: Yeah, peer-to-peer selling is something very similar. So we're using online platforms to sell items which will become your business activity. You could be selling art stuff, you could be selling goods that you've purchased through other, you know, avenues like online or through the store or wherever. And you could be selling it for a markup.

Peer-to-peer selling can include, a lot of times shoes are a large commodity. People are purchasing shoes in large stock and selling it online with a little bit of markup.

CC: What if it’s not at a markup? Like, what if I am selling a leather jacket that I don't fit anymore? 

Vikram: Yeah. So this kind of stuff, it doesn't really constitute a business, right?

We'd have to establish a a reasonable business structure where the purpose of the selling is to create profit and earn income. If you are actually just selling used furniture from home to get rid of it, or used clothing, you can do so. And you wouldn't be required to report any income from that, because that's not really something you're reliant on for day-to-day activities and, you know, paying for your cost of living.

CC: I see. What is social media influencing? 

Vikram: Yeah, so social media influencing is, is one of the more popular and bigger platform economy activities. It can include individuals who are content creators, bloggers, fashion experts, or lifestyle promoters and motivators and they’re leveraging platforms and their social media followings to create, essentially, an influence, for the lack of better words, online and generate income through a vast option of of revenues. And it can include sponsorships, advertisements, selling merchandise through platforms and things like that. So the options are very vast in this sector.

CC: So this is my dream, actually, to become a social media influencer. I would love to, I mean in addition to hosting CRA podcasts, I would love to have a job just getting free food and eating at fancy restaurants for free. Would all that be something that's considered income? 

Vikram: So it depends, right? If somebody is hiring you to do those things and they're paying you, you know, a certain amount to do that the amount you earn for that activity would be your income. But sometimes people are doing this as a self employed business, right? So they're essentially doing all the, trying the new foods, going to new restaurants, new places on their own merit. They're paying for those items out of pocket, and whatever content they post online is what they would be able to monetize over.

CC: So I don't wanna pay for it, I just want to get the free food.

Vikram: Right. So essentially that would involve sponsorships, right? So anybody who is willing to come to you to advertise maybe their restaurant or their brand, and they're willing to, you know, do that by having you sit down at a fancy restaurant and so on and so forth, that would be a perk to you.

CC: Okay. So more complicated than I thought. 

Vikram: Mm-hmm. 

CC: We're in a new era of an online storefront. Some people say that if you don't have a physical brick and mortar store then you don't need to abide by the same rules. Is that true? 

Vikram: That's unfortunately not true. You know, for people that think that even though businesses are being operated online, it has been that way for a long time. But right now I think it's just been more prevalent given the economy and the way things have been operating. Just because people are working from their home, and they don't have a brick and mortar business location, doesn't mean that a person is not operating a business. So for people who are under the misconception of that, I would definitely urge them to do a little bit of more research and contact the CRA if they have any more questions.

CC: So you were talking about people considering themselves as self-employed. When you are a self-employed person, how do you - what are the tax implications for activities under platform economy? 

Vikram: As a self-employed individual, you have to follow basically the guidelines that have been posted for all self-employed individuals.

So it doesn't matter if you're operating on platforms or online websites, the same rules would apply if you were, you know, a restaurant owner or a hairdresser or any sort of brick and mortar type of business. So essentially you would be responsible for income tax reporting as well as GST/HST, given the threshold amounts, and that would have to be done on a annual basis.

CC: Do I have the same deadlines as a self-employed individual as a non self-employed individual? 

Vikram: No there's some extended deadlines for self-employed individuals. If you're filing as a business, you have a little bit of extra time versus someone who is perhaps an employee. But the traditional deadline for filing your taxes is April 30th. And for businesses, it's six months after your year end. 

CC: Okay. And businesses can have various year ends.

Vikram: That's correct.

CC: Got it. What are some other tax obligations to meet if you're self-employed? 

Vikram: There's also obligations to contribute to your CPP and QPP for the year. If you are self-employed, you must file those pension amounts and be diligent to do so, so that in the future when time comes to retire, you have something that you've been contributing to.

And as I mentioned earlier, there's income tax obligations. So you have to be filing your income tax, and that's through your T1 or your T2 returns. And for your GST/HST, you can file either on a monthly, quarterly, or annual basis, depending on how you structure your corporation or how you register your business number.

The threshold is $30,000. So if you make over $30,000, you'll have to register for GST/HST account through the CRA website and you'll have to collect and remit the appropriate GST/HST amounts to the CRA. There is a key note here though. If you are operating in a ridesharing business activity such as Uber or Lyft, our taxpayers will have to register regardless of how much they earn throughout the year. So that $30,000 threshold does not apply to ride sharing drivers. 

CC: Okay, but if I am a piano teacher that makes $29,000 a year, then no GST number for me.

Vikram: Yes, technically yes. 

CC: But I'd still need to report my income. 

Vikram: That's correct. So income tax, even if it's a dollar, you know, let's say you had $10,000 of income and you had $9,999 worth of expenses that you claimed you still have to report all that. And even if your taxable income is $1, the obligations are to file and make sure that they're done so correctly. 

CC: I know it's not just about reporting and paying taxes. What are some business expenses that I could claim related to platform economy activities? 

Vikram: As I mentioned earlier, even if you are earning low income, the reason why you have to report is because you might have expenses to reduce that gross income that you're earning throughout the year.

So what really is the bottom line here is the expenses that you incur for the year have to be incurred for the purpose of earning your income from your business activities. So let's just use an example of the piano teacher. If the piano teacher is driving back and forth from her clients, or she is meeting with clients at certain locations and incurring expenses for meeting with them. There's office supplies, things like that. All those expenses that have incurred for earning her income would be eligible business expenses. But there's a fine line here where personal expenses would not be eligible and taxpayers have to use their professional judgment while claiming these types of expenses as they're not allowable for business purposes.

CC: So I can't necessarily claim a five star meal and then put it on my Instagram, but I could potentially claim piano tuning?

Vikram: Right, that's correct. 

CC: So if you're using a platform to run your business, will they automatically provide all of the information that you need in order for you to do your tax return?

Vikram: Yeah, they should be giving you the receipts and statements and invoices that go along with the businesses that you're operating or the transactions that you're taking place. So each and every platform, I would say is operating on its own different standards. They have their own receipts to issue and they do so at their own different times.

So I can't say that each platform has a standard that everybody follows, but I will say that every platform should have a way that our taxpayers can access their invoices and receipts, and you just have to read the terms of use and terms of agreement that are presented at the beginning when you sign up.

So a lot of times when we sign up for accounts on these platforms, there's a huge list of terms, right? That we usually just skip through and we click agree. 

CC: Of course. 

Vikram: So I would say we just need to go back, read those, and understand what you can do to get those books and records and statements to be able to use those for tax purposes.

CC: That’s super helpful. What misconceptions are there about the platform economy? 

Vikram: Just because things are newer and we have a new way of doing business doesn't mean that we're not operating a business. We're still exchanging goods and services online. So income needs to be reported in the same way as it has been in the past.

And there are other particular aspects that need to be looked at closely, like receiving tips, donations, and sponsored items. These types of items are not just gifts, right? So they're legitimate income earning activities. And when you're receiving, you know, tips, gratuities donations, or free items from your business activities you still have to report these.

And the reason why is because you're still providing a service such as promoting a product on your social media channels or selling goods or services online. And for that reason, you should be reporting these items, right? So the word donation kind of gives a misconception that it's just free money that is not taxable.

So that, I would like to highlight that it is kind of a result of you operating your business and it's still a very much taxable item. 

CC: Hang on. Tips and donations are taxable? 

Vikram: That's correct. We can use the example of a streamer, right? So a streamer is conducting their stream online. They're promoting, they're perhaps promoting a game and they're streaming themselves playing a game. And to applaud the individual, we're sending them tips and donations through their website, right? So those tips and donations are being delivered to the taxpayer through specific emoticons or emojis or different kinds of platform specific methods.

And when the taxpayer receives those types of thumbs up, or things like that, they can convert it to cash and they can then deposit it into their own online accounts. So they're essentially monetizing from their stream. So because the word itself is just, you know, saying donation or you're tipping the person, you're actually paying them out of your own pocket to reciprocate what they're providing you through the stream.

So it's essentially income that you're earning. 

CC: I never thought about it like that before. What is the CRA's role in all of this then? What can the CRA do to help those who are unsure of their tax implications? 

Vikram: So the CRA is actually here to help everybody understand their tax obligations, whether it's from platform economy activities or other sort of business activities.

But we are really, really understanding that the platform economy itself is still a very new and fast paced industry, which is growing very, very quickly. And because it's still very new, we understand that taxpayers may not understand all their tax responsibilities off the bat. So in those instances, we believe it's very important for the CRA to communicate their tax obligations and share whatever sort of knowledge we can through all avenues.

But we encourage all individuals or businesses to contact us and reach out to us through our CRA websites to learn more and ask questions if they do have any. But the main bottom line here is that we know of all of these concerns that taxpayers have, or may have, and we're taking the right steps to increase the taxpayer's awareness of the platform economy.

And we're focusing on an educational first approach to help our taxpayers understand what sort of tax responsibilities they have. And also to help them understand what activities they are taking part in, in the platform economy.

Last but not least, I also wanted to mention that there is a liaison officer initiative that taxpayers can reach out to the CRA through. And essentially here we will help individuals understand their self-employed tax obligations and that will include keeping good books and records that they are able to use to understand their full income and expenses, and what will help the taxpayer report their income is keeping these good books and records so that they can document their transactions so that they can ensure they're claiming everything that they're allowed to do. And having those good books and records will enable the taxpayer to do that. 

CC: That's so cool. How can I sign up for a liaison officer visit? 

Vikram: You just have to visit the CRA website. Use the search engine in the CRA website, and the website will be able to guide you through what steps you need to do. 

CC: Okay, easy. Any last points that we should know about for platform economy? 

Vikram: So the platform economy, I would say if you have any questions or you don't believe you fall under any of these four categories that we've highlighted - like gig, social media sharing, and peer-to-peer - I would say definitely reach out and ask the CRA to provide you with assistance, because some of these categories, they're not fully exhaustive.

They can be new ones that are emerging or there might be some overlapping ones that are taking place. So don't be hesitant to reach out and don't get confused if you believe you fall under more than one category. There's individuals who are taking part on social media and peer-to-peer because they're selling merchandise to their viewers and also their earning revenue through streaming channels.

And at the same time, they might be operating a gig to help other content creators to do their business activities. And maybe they have another rental property that they're renting through an accommodation sharing website.

So I would say if it's what you're doing, then you might be able to, you know, you might be taking part in all of these four categories. If you're doing well. 

CC: I think we should quit our jobs and I think we should go into business together making an Instagram account for five star restaurants in town.

Vikram: Absolutely. That would be the dream to basically promote food and be able to taste it all and be a critic online because nowadays we have the ability to do so from the comfort of our home.

CC: I love it. A lot of social media influencers get a bad rap for having an easy job, but it's not actually that easy. And then now you have to add in all of these tax obligations too. Like it's as a big, big deal. This is a small business. It's an enterprise. 

Vikram: Yeah, absolutely. It's a huge undertaking, right? You have your clients that earn you revenue. You have your suppliers that you have to incur expenses to purchase things for, and you have your own things that you need to deal with.

So it is a very big undertaking. It is a business like you said, and if you're involved in any of these activities, right, taxes are just a hand in hand. They go hand in hand with business. So it's definitely something that everybody needs to get used to. 

CC: Awesome. Thanks for coming on, Vikram.

Vikram: Thank you. It was a pleasure being here. And I hope everybody learns their thing or two about platform economy. And if there are any questions, I would recommend to do a quick search on the internet, including, you know, CRA and the platform economy. And also do a quick follow to the CRA Instagram page.

CC: Yeah. @CanRevAgency! 

Vikram: There we go. I'm gonna go home and do a quick follow myself.

CC: Thank you. And that's it for today's episode of Taxology. I hope this episode helped you understand what is the platform economy and what to know before you decide to sell your maple syrup scented candles online, or if you're selling your cat crochet projects. Wait, do cats crochet?

A big thank you to Vikram for joining us. If you'd like to learn more about anything from today's episode, please visit Canada.ca/taxes, or check us out on Facebook, Twitter, or Instagram. Our handle is @CanRevAgency. Follow us to find out more about this topic and so much more. I'm your host CC, and this has been Taxology.

Thanks for listening. Please, stay safe and do your taxes.