Facebook falls short on national sales tax collection

Only in Quebec and Saskatchewan

Facebook Inc. is not collecting sales tax on advertisements purchased through its physical offices in Canada, despite saying it expected to begin doing so by mid-2019. Fifteen months later, it is doing so only in Quebec and Saskatchewan, and won't provide a timeline for when its cross-country tax-collection efforts will begin.

“We've experienced delays partly due to COVID and other urgent priorities, like providing grants and training for small businesses hit hard by the pandemic, as well as prioritizing the launch of Facebook Shops,” said spokesperson Meg Sinclair. Facebook Shops launched in May. The pandemic had widespread effects in Canada starting in March, nine months after Facebook's original stated goal.

The Logic reported in August 2018 that Facebook wanted to start collecting sales tax in Canada. “Our move to the local selling model should be in place globally by mid-2019,” Sinclair said at the time. “This is a significant undertaking with different laws in each country, so our primary focus is making sure we get this right.”

At the time, it was facing pressure from Canadian tech and media companies, which wanted the federal government to change the law that exempts foreign tech firms from charging sales tax while requiring their domestic competitors to do so. Facebook broke ranks with other Big Tech companies when it said it would start collecting tax. At the time, Google, Netflix, Airbnb and Spotify all said they'd start doing so only if Canada's governments required them to.

The two provinces in which Facebook has begun collecting sales tax — Quebec and Saskatchewan — are the two that have passed laws requiring foreign tech firms to do so.

Facebook declined to share how much money it's collected in sales tax in Canada, or to provide a timeline for when it would collect tax nationwide. “Mid-2019 was a goal we were hoping to reach, it was not a firm commitment,” said Sinclair. “Our primary focus is making sure we get this right, even if that takes longer than initially planned.”

The federal government has grown increasingly bullish on regulating tech firms in the last two years.

In 2019, the Liberals campaigned on a three-per-cent tax on the income of tech giants doing business in Canada. After their election, the finance minister's mandate letter identified as a top priority ensuring “international digital corporations whose products are consumed in Canada collect and remit the same level of sales tax as Canadian digital corporations.”

Finance Minister Chrystia Freeland's office didn't respond to The Logic's questions on the policy's implementation. “The government is committed to ensuring that everyone pays their fair share of tax so that it continues to have the resources needed to invest in people and to help our economy weather the COVID-19 pandemic,” said Finance Canada spokesperson Anna Arneson. “That includes ensuring that companies in all sectors, including digital enterprises, pay their fair share in respect to their activity in Canada.”

It's not just the Liberals who are looking to tax tech giants. Earlier this month, NDP leader Jagmeet Singh, whose party has propped up the minority Liberal government by voting with them in the House of Commons, called for a new tax on excess profits that companies like Amazon made during the pandemic, as well as generally higher taxes on “web giants.”

The Conservatives are also looking for foreign tech giants to collect sales tax.

“I find it perplexing that when the government wants to reach into Canadians' pockets with a new tax, they figure out how to do it quickly, but when it's about making sure foreign tech giants pay their fair share, they drag their feet,” said MP James Cumming, Conservative critic for innovation.

“This is a competitiveness issue. Canadian businesses are paying higher taxes while foreign tech giants are not, and the longer this goes on, the worse it is for Canadian companies.”