The province of Quebec passed a budget on Tuesday which includes services like Netflix to start charging customers provincial sales tax, starting January 1, 2019. The move is to create a level playing field among subscription video services.
Both Canadian and international companies which surpass $30,000 annually in revenue from sales of digital services to Quebec residents, will be required to register for a QST number and start charging customers the provincial tax. For Canadian companies, the QST ruling takes place later in September 2019.
According to the Montreal Gazette, Quebec plans to raise nearly $155 million in additional tax revenue over five years—well below Revenue Quebec’s estimate of the estimated $226.8 million in taxes that went uncollected last year by foreign digital suppliers.
“We’re starting in a prudent way,” detailed Finance Minister Carlos Leitão. “I don’t think it would be prudent to say we’re going to be capable of getting X millions of dollars.”
Quebec has been pushing for the federal government to charge a ‘Netflix tax’ for GST, but so far Prime Minister Justin Trudeau has stood firm and resisted the notion.
According to the Gazette, the Organization for Economic Co-operation and Development (OECD) has recommended GST for digital services like Netflix, while Bell’s Crave TV and Videotron’s Club Illico have lobbied for the tax as well, as the latter companies collect sales taxes unlike foreign companies.
If you think you can avoid the provincial sales tax on Netflix, think again, as Quebec will require companies to validate resident addresses—their “usual place of residence”—with “two non-contradictory pieces of information”, which will include billing and home addresses, IP address, banking info or phone number.
Those caught trying to avoid the tax by falsifying their address will pay a penalty of $100, or 50% of the provincial sales tax payable, whichever is higher, and on top of unpaid taxes plus interest.
For digital streaming service companies like Netflix, the government says those who meet these new requirements will be granted some leeway in the first year of the tax. The Quebec government plans to make it easier for companies to register for QST online and even accept payments in foreign currencies.
Quebecor CEO and former Parti Québécois leader Pierre Karl Péladeau, the parent company of Videotron, praised the tax implementation, saying “We are happy to see that, contrary to the federal government that persists in its abdication in the face of online giants, the Quebec government has followed its unprecedented mobilization in cultural affairs by obliging online platforms to impose sales taxes.”
Quebec passed a motion last fall to impose a sales tax on Netflix, shortly after the company and the federal government announced a $500 million investment deal to produce original content in Canada.
What do you think about paying QST on Netflix in 2019?