Question 1

Do I charge HST on the whole transaction or just my commission?

Accepted Answer

It depends entirely on whether you are acting as principal or as agent, and this is the first thing to settle on a platform file because it sets the measure of everything else. If you supply the underlying goods or service to the customer as principal, GST/HST applies to the gross transaction value and the vendor's share is your cost. If you act as agent for the vendor, your own taxable supply is the intermediation service and tax applies to your commission. ETA section 177 deals with supplies made on behalf of another person and provides an election under which a billing agent may account for the tax collectible on the principal's supply, which is often how marketplaces handle it in practice. The difference between the two positions is the entire gross-to-net gap, so getting it wrong is wrong by a very large number. We will not tell you which you are on a web page.

Question 2

Am I an agent or a principal?

Accepted Answer

Your contracts decide, not your pitch deck or your intuition. The questions that matter are who is the supplier to the end customer, who sets the price, who bears the risk when something goes wrong, who the customer has recourse against, and what your terms of service actually say about the relationship between the three parties. A platform that describes itself as "just a marketplace" while setting prices, controlling the customer relationship and taking responsibility for service failures may well be a principal despite the label. The reverse happens too: platforms that are plainly agents charge tax as though they were principals because it felt safer. We read the documents rather than accepting the description, and we tell you plainly when the terms do not support the position the company has been taking — which is a better conversation to have with us than with a sales tax auditor.

Question 3

Do I have to collect HST for my sellers?

Accepted Answer

Possibly, and this surprises founders more than anything else on the file. Canada's distribution platform operator rules can make a platform, rather than the underlying vendor, responsible for collecting and remitting GST/HST on supplies facilitated through it where the vendor is not registered. In other words a small software company can become the tax collector for thousands of other businesses' sales. Getting it backwards costs money in both directions: a platform that assumed its vendors were handling it has under-remitted, while one that charged tax on top of registered vendors who were already collecting has overcharged buyers and created a mess to unwind. We will not tell you on a web page whether your platform falls inside the rules, because the answer turns on the actual arrangement between you, the vendor and the buyer. We check it against your agreements and build a vendor registration status check into onboarding so it stops being a guess.

Question 4

What is Part XX platform reporting?

Accepted Answer

It is the obligation most platform founders have never heard of. Part XX of the Income Tax Act requires a reportable platform operator to apply due diligence procedures identifying its reportable sellers, then file an annual information return with the CRA naming each one and the total consideration paid to them over the year. The return is due by 31 January following the calendar year reported, and that is a hard date. The relevant activities covered include the sale of goods, personal services, and the rental of immovable property and of means of transport, so which of those your platform facilitates decides what you report. There is a de minimis exclusion for the smallest sellers of goods, and we check its thresholds against the rules on your actual data rather than publishing a figure here we have not verified. The practical consequence is that the CRA receives your sellers' gross figures directly, and it matches them.

Question 5

Who is a reportable seller, and do I report the tiny ones?

Accepted Answer

A reportable seller is one your due diligence identifies as being in scope, and the determination depends on their residence and on the activity they carry on through your platform, not on how much they earned. There is a de minimis exclusion aimed at the smallest sellers of goods, which is why many platforms assume their casual users are out of scope — but the exclusion is narrower than people hope and it applies to goods, so a platform facilitating personal services or rentals should not reach for it. The harder problem is usually not deciding who is reportable but being able to report them. Part XX requires identifying information and tax identifiers, verified for residence, and a platform that never asked at signup cannot produce them for a user who has since deleted their account. That is why we treat this as a product requirement rather than an accounting one, and specify what onboarding has to capture before the first return is due.

Question 6

Is the money I hold for users my revenue?

Accepted Answer

No, and treating it as revenue is the classic platform accounting failure. Pending payouts, wallet balances, escrow and security deposits are liabilities: money you are holding that belongs to somebody else. The gross settlement figure your payment processor reports is not an income number either — it is everyone's money net of fees. We have restated a platform whose reported revenue was roughly eight times its actual commission income because it had been booking settlements as sales, and the founders genuinely believed they were running a much larger business than they were. The more serious version of the problem is operational rather than cosmetic: a platform that funds payroll out of the account holding seller money is spending money it owes, and that gap becomes visible in the first slow month. We show the liability separately and reconcile it to actual bank and processor balances every month, so what you owe is a known figure.

Question 7

How do I account for pending payouts and chargebacks?

Accepted Answer

Pending payouts sit as a liability from the moment you collect until the moment you pay the vendor, and the balance should reconcile to real cash you are holding rather than to a figure in your own ledger. Chargebacks are harder because they flow backwards through the platform: the buyer gets refunded, the vendor has frequently already been paid out, and the platform absorbs the gap until it recovers it from the vendor or writes it off. That needs its own treatment and its own reserve rather than appearing as a mystery variance in a fee account. One more thing we routinely find: the reserve your processor holds back is still your asset and belongs on your balance sheet, not written off as a processing cost. On a platform with any volume that reserve can be a meaningful sum, and it is the single most common place we find money a client did not know they had.

Question 8

Should I report gross or net revenue?

Accepted Answer

Whichever the agent-or-principal characterisation requires, which is why we settle that first. A principal reports gross revenue with the vendor's share as a cost of sales; an agent reports only its commission. Reporting gross while acting as agent inflates the top line without adding a dollar of profit, and it is exactly the thing a diligence team unwinds in its first week — at which point your headline revenue number falls by most of its value in front of the people you were trying to impress. Better to be right from the start. We also keep gross merchandise value reported separately as its own metric rather than blended into revenue, because both figures are genuinely useful to a platform and conflating them is how founders mislead themselves as much as anyone else. And we keep the take rate visible, since a platform that cannot say what share of transaction value it actually keeps does not yet know whether the model works.

Question 9

Do I need to register for GST/HST, and when?

Accepted Answer

Once your worldwide taxable supplies exceed $30,000 in a single calendar quarter or over four consecutive calendar quarters. The platform-specific trap is measuring that against the wrong number: a company that tracks gross transaction value when its actual taxable supply is a commission may conclude it crossed the threshold a year or more before it really did. That is another reason the characterisation comes first. Two further points. Zero-rated supplies to users outside Canada count toward the threshold even though no tax is charged on them, so a platform with mostly foreign users can be required to register while collecting almost nothing. And voluntary registration before the threshold is often worth it for a platform with a large taxable cost base — cloud, contractors, software — because it converts that embedded tax into recoverable input tax credits. We model it on your real figures rather than applying a rule.

Question 10

Do I charge HST to users outside Canada?

Accepted Answer

For Canadian GST/HST purposes, generally no. Supplies to users outside Canada are typically zero-rated under Schedule VI Part V of the Excise Tax Act, so no tax is charged while the supply still counts as taxable for your registration threshold and your input tax credits. For Canadian users the place of supply rules set the rate by the customer's province, with Ontario at 13%, and digital services have their own tests for determining where that place of supply is — which for a platform with users in every province means several rates running at once rather than one default. Separately, if the company is itself a non-resident making specified supplies to Canadian consumers, the simplified registration regime may reach it, and our registration checker will tell you whether it does. What this page does not tell you is anything about foreign tax: no United States state rate, no nexus test, no marketplace facilitator statute and nothing on digital services taxes elsewhere.

Question 11

Can I claim SR&ED on building my platform?

Accepted Answer

Sometimes, but building a marketplace is not automatically SR&ED and claims that assume otherwise do not survive review. Qualifying work goes into the pool under ITA section 37 and generates investment tax credits under ITA section 127, refundable at an enhanced rate for a Canadian-controlled private corporation up to its expenditure limit — we state no rate and no limit here, because those are specific and a claim built on a number from a website comes apart at the technical review. Shipping features, integrating a payment provider, building an admin panel and scaling a database using known techniques are all development, and development on its own does not qualify. What can qualify is the point where the known techniques ran out: a matching or routing problem with no established solution, a fraud detection approach nobody could make work at your transaction volume. We document that work while it happens, because reconstructing it afterwards reads like marketing.

Question 12

When should I incorporate, and what do investors want to see?

Accepted Answer

Most platforms are incorporated from the start because investors require it, so the useful work is getting the structure right before money arrives rather than debating whether to incorporate. Incorporation brings the small business deduction under ITA section 125 against the $500,000 limit, the ability to retain earnings at corporate rates, and the share structure a round needs. We model salary against dividends for the founders, including the effect on RRSP room and on the income record a mortgage lender will accept, which matters after three years of paying yourselves nothing. We choose the fiscal year end deliberately, because closing before or after a round changes what the data room shows. What investors consistently ask a platform for is specific: revenue on the correct basis, gross merchandise value and take rate shown separately, held funds clearly identified as a liability, a clean settlement reconciliation, and no nasty surprises in the reporting obligations. We prepare those before the request arrives.

Question 13

What do you actually do, and what do you not do?

Accepted Answer

We are Ontario CPAs. We prepare and file your corporation's T2 with the small business deduction and loss carryforwards, settle the agent-or-principal characterisation from your contracts and document it, present revenue on the basis that follows, work through whether the distribution platform operator rules reach your arrangement, prepare and file the Part XX information return and specify the onboarding and verification your due diligence needs, show held funds as a liability and reconcile settlements back to gross transaction value, handle registration and place of supply, build the SR&ED claim from contemporaneous records, set up payroll, model structure for a funding round, and deal with CRA correspondence, objections and relief applications. What we do not do: we characterise nothing on a web page, neither agency nor operator status; we state no SR&ED rate or limit; we state no foreign tax rule; we give no advice on money services business status, FINTRAC registration or payment licensing; and we quote no fee beyond our published pricing.

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