In a September 18, 2007 ruling, Justice Roger Hughes of the
Federal Court of Canada affirmed that the Canada Revenue Agency
(CRA) has the right to examine records on Canadians who
generate monthly sales of more than US$1,000 through the online
marketplace on eBay, also known as 'PowerSellers.'
The judgment was a review of a November 6, 2006 order
against eBay Canada Limited and eBay CS Vancouver Inc.
requiring that they provide information to the Minister of
National Revenue about the PowerSellers. The CRA sought
information — including names, mailing and billing
addresses, phone numbers, e-mail addresses and sales figures,
in its investigation of whether individuals were reporting the
income they had generated from sales in 2004 and 2005.
eBay Canada and eBay Vancouver contested the order, claiming
they did not own or possess in Canada any information regarding
these sellers. Specifically, the Canadian eBay entities argued
that all information related to users' sales transactions
was stored electronically on computer servers located in the
US, and was owned and under the control of eBay Inc., a US
corporation and the ultimate parent company.
The key issue in this case was whether Section 231.2 of the
Income Tax Act permits an order requiring a Canadian
resident to provide information to which it has access in
Canada, but that is stored in data facilities owned by another
party outside of Canada.
Though Justice Hughes agreed that this information is not
'owned' or controlled by eBay Canada, he found that
eBay Canada has access to this information and, more
importantly, accesses and uses it in the course of its business
operations in Canada. The location of the servers is
irrelevant. In today's world, electronic information
"cannot truly be said to 'reside' in only one
place or be 'owned' by only one person. The reality is
that the information is readily and instantaneously available
to those within the group of eBay entities in a variety of
It should be noted that this case is continuing. The issue
of whether the CRA has provided sufficient evidence to
demonstrate it is carrying out a "genuine and
serious" inquiry is still to be addressed.
McCarthy Tétrault Notes:
As this case may require businesses to provide customer
information to CRA in certain instances, it could have
important implications for businesses and their customers.
Information concerning Canadian clients that can be accessed
and used by an online commercial enterprise in Canada appears
to be fair game regardless of where the information is stored
or who asserts ownership over it.
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).