sales tax

#603: Canada Wants to Tax Your Staff Discount

Canada Wants to Tax Your Staff Discount

Record store employees! Have you heard? Now the Canada Revenue Agency wants a piece of your staff discount.

According to CTV, “when an employee receives a discount on merchandise because of their employment, the value of the discount is generally included in the employee’s income.”  They will calculate the tax by using the “equal to the fair market value of the merchandise purchased, less the amount paid by the employee.”   That is unless the discount is “available to the public or a segment of the public, at some point during the year.”  Those car deals where you “pay what the employees pay” wouldn’t count as a taxed staff discount, which is good for people who work at dealerships.  CD stores generally don’t have a “staff discount sale”.

Let’s say, just like when I was working in the Record Store, an $11.99 CD gets sold to you at the discount price of $7.99. The government now wants to tax you on the $4 discount that was the only perk of a crappy retail job.

I used to buy several CDs a week.  Let’s say for the sake of conservative estimates that I bought three CDs a week with my discount.  Let’s take the same $4 discount used in the example above, with Ontario’s 13% sales tax.  That’s $0.52 of tax now added.  $0.52 per CD on three CDs a week, multiplied by 52 weeks:  That’s $81.12 a year of brand new taxes, enough to buy several albums instead.

Conservatives are accusing Prime Minister Justin Trudeau of exploiting Canadians who can least afford it. Lisa Raitt, Conservative Deputy Leader, said the government is “picking the pockets of minimum wage earners.” Finance critic Pierre Poilevre says the tax will “target those who can least afford to pay more”. Other commentators have noted that staff discounts will need to be rigorously tracked for taxation.

It is true. At the Record Store, a manager would simply ring in the staff sale with discount. Now, copies of receipts will have to be kept, filed and forwarded to Payroll, with the original price and discount.  This will cost businesses time, but they will have no choice but to comply with whatever law takes shape.  All paperwork would have to be kept in case of audit.

If this goes through on January 1, it will stink to high heaven.

Staff discounts on a CD, or a pair of shoes, or a meal are part of the perks of working a thankless job. It’s something people can look forward to. Celebrate passing your three month probationary period with a discounted purchase.

Who is going to pay this tax, the employee or the employer? It will hurt both regardless. Employees may have to stop taking advantage of discounts and just buy less from their places of work.  Some people only buy non-essential luxury items from work (like CDs), but what about those who get a staff discount on necessities?  That’s a part of their shrinking budget.

Canadians are tired of being nickel and dimed to death with taxes. It’s hard enough making ends meet, and this tax goes after something previously held sacred. It’s not good for Canadians and we certainly hope it does not come to pass.

UPDATE:  Feds are now denying this story and say there’s no such tax coming.   Hmmm.



Part 277: Sales Tax

RECORD STORE TALES Part 277:  Sales Tax

Early September.  Our stores were flooded with students new and returning.  This is an exciting time for many.  For the students, it’s another exciting year at one of our local colleges or universities.  For me, it was meeting and hopefully keeping new customers.  Sometimes though, there were some customers that were just never meant to be.

I remember ringing in one used CD for a customer.  He was a young guy, a new student in town.  If you’ve ever been a young student (Lord knows I once was) sometimes you run into those that “know it all”.  I was one of those, too.  This guy was one as well.

I rang in his CD sale.

“That comes to $13.79 please,” I said as the computer calculated the Provincial Sales Tax and the Goods & Services Tax.   Some, such as people with native status cards, are exempt from PST.  Most were not and had to pay the full (then) 15% tax.  Yeah, it’s a lot.  We Canadians pay a lot of sales tax.

“Is there tax on this?” the customer asked.

“Yeah unfortunately,” I responded.

“That’s wrong,” he answered abruptly.

Not understanding his full meaning I responded sympathetically, “Yeah, I know, but what can you do.  The government’s going to take their part.”

“No, I mean that’s wrong, that’s not correct.  You can’t charge tax on a used CD.”

Hooboy.  I don’t know where this guy came from, but he’d obviously never bought a used CD before.  I tried to explain, as a line began to form behind him.

“We have to charge tax on a used CD, because the government’s going to collect it from us whether we want it or not,” I said.  “We’ve been selling used CDs in this province for over five years now, and reporting it to Revenue Canada.  Believe me, if we didn’t they’d be in here pretty quick with a nice audit.”

He appeared stubbornly stumped.  Not understanding the concept of sales tax applied to the end-user, he repeated “That’s not right.  A used CD isn’t the same as a used car.  You can’t charge sales tax on a used CD.”

At this point I didn’t have much else left to add.  “Well, you can certainly check this out for yourself, but every used CD store here in town charges PST and GST on every used CD they sell.”  I fibbed slightly; there’s a store in uptown Waterloo called the Orange Monkey that seemed semi-legit at best.  They had no cash register, no debit machine, and charged no tax on anything in their store.  I don’t know how they did it.  Leaving them out of the equation, I continued.  “Every used CD store I’ve been to in this province has charged me sales tax on every CD.”

“This is really irregular,” he said frustratingly as he finally paid for his CD.

It might be irregular, but all used CD stores in this province still charge sales tax on used goods.  That’s a fact Jack!