Court Orders E-Bay to Disclose Sellers to Canadian Tax Authority

In November 2006, the Minister of National Revenue (MNR) applied for and obtained an order (Order) from the Federal Court of Canada (Court), without notice to the respondents, against two affiliated companies, eBay Canada Limited and eBay CS Vancouver (collectively, eBay), owned ultimately by an offshore corporation, eBay Inc. The purpose of the Order was to enable the MNR, under section 231.2 of the Income Tax Act (Act), to investigate whether certain eBay members who were Canadian residents were reporting income from sales made on the eBay marketplace. The Order required the disclosure of the names, addresses, phone numbers, e-mail addresses and gross annual sales of any Canadian seller who qualified for eBay's PowerSeller program during 2004 to 2005. In order to qualify for the program and receive exclusive benefits, a member's sales activities had to be free of complaints and they had to have achieved consistent minimum sales levels. Section 231.2 of the Act provides a broad power permitting the MNR to require any person to provide any information related to the administration or enforcement of the Act. Later, eBay applied to the Court for a review of the Order, arguing that it did not possess or own any information about PowerSellers in Canada, as the information was located on computer servers located in the United States and owned by eBay affiliates not resident in Canada. The Court rejected this position and confirmed the Order, finding that although the information was stored outside Canada, eBay had access to and had used the information as part of conducting its business in Canada. The Court further distinguished the situation from one in which the information at issue was never used in Canada. For an article in The Globe and Mail, see: http://tinyurl.com/2eysxk For the full text of the decision, eBay Canada Limited v Canada (National Revenue) 2007 FC 930, visit: http://decisions.fct-cf.gc.ca/en/2007/2007fc930/2007fc930.html Summary by: Lauren Lodenquai