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Federal Court of Appeal Upholds Ebay Power Seller Decision

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Friday November 14, 2008
The Federal Court of Appeal has upheld an earlier decision ordering eBay to provide information on Canadian power sellers.  The Globe and Mail reports that the Canadian Revenue Agency plans to escalate its investigation in light of the decision.  A key part of the case turns on the fact that the requested information is located on servers outside the country.  This leads the court to discuss concerns associated with Internet jurisdiction and cloud computing, with it arriving at the view that for the purposes of the Income Tax Act, the availability of electronic documents on computer servers located anywhere in the world can be treated as located in Canada.  It notes that:

"it makes no sense in my view to insist that information stored on servers outside Canada is as a matter of law located outside Canada for the purpose of section 231.6 because it has not been downloaded. Who, after all, goes to the site of servers in order to read the information stored on them?"

While this conclusion may be limited to the specific Income Tax Act provision, the concept that the mere accessibility to an electronic document (wherever located) can be treated as being located in Canada could have enormous implications for many other areas of the law if there were attempts to extend the analysis.
Comments (10)add comment

doug said:

Hmm...
Interesting. Would this then also apply to a Bahamian bank's (or any other country's) electronic records for those looking to get their money out of the country to pay less tax?
November 14, 2008

Anon said:

Is it because eBay has presence in Canada?
It looks like it is deemed to be located in Canada because eBay has presence in Canada.

Dr Geist, could you elaborate on the issue of jurisdiction here? What if it were not eBay, but some other company, without any presence in Canada?
November 14, 2008

David Mackintosh said:

Dangerous
Arguing that the content should be considered in Canada for the purposes of Tax legislation is a gateway to it being considered in Canada for other purposes. For example, news blackouts or publication bans. It would enable China to argue that content in Canada is under Chinese law since Chinese people can get at it.
November 14, 2008

Colin McInnes said:

Presence in Canada
I don't see this as a gateway to arguing that companies fall under Canadian law if they are accessed by Canadians. Instead, we see a Canadian company trying to use the fact that it's data is stored offsite as an excuse to not cooperate with Canadian authorities.

If the company had no Canadian presence, then Revenue Canada would have no jurisdiction. But since EBay *CANADA* does business *in* Canada, with Canadians, with a Canadian headquarters, I think RC has every right to demand sales info for the purposes of tax collecting. Regardless of where EBay chooses to store the data itself.
November 14, 2008

vaudevillian said:

...
I think this also has to do with sales tax and trying to make sells pay that too, I think. Which would suck because canadians could not compete period. Our government is a fraud.
November 14, 2008

march said:

they'll get out
you'll see ebay canada getting out of canada and still use ebay canada as a brand but they will be located in the US period.
Anyway that's what i would do
November 14, 2008

chronoss said:

Stupid is as stupid does and life is like a box a chocolates
so you pay fees at ebay, that technically pay american taxes
then you pay income taxes here
and then they'll want you to pay on top of that sales taxes

ya way to be stupid and innovative
November 15, 2008

Mister Observant said:

Ebay operates in Canada - this should be a non-issue
According to WHOIS info:

Name: Ryan Quick
Job Title:
Postal address: eBay Canada Ltd.
2 St. Clair Avenue East Suite 701
Toronto ON M4T 2T5 Canada
Phone: 1 416 2977000

Are they a Canadian Corporation? It looks like it. If you are a Canadian corporation and you want to hide your financial records in another country, I would absolutely expect Revenue Canada to come looking for you, probably with the RCMP. If I, as a Canadian Citizen, hide all receipts and invoices in the the U.S. I would still have to bring them back to produce them when the audit occurs - physical, virtual, or otherwise.
November 15, 2008

Interesting Twist said:

Adding to the fact pattern
Responding to Colin McInness - who said
" Presence in Canada
I don't see this as a gateway to arguing that companies fall under Canadian law if they are accessed by Canadians. Instead, we see a Canadian company trying to use the fact that it's data is stored offsite as an excuse to not cooperate with Canadian authorities.

If the company had no Canadian presence, then Revenue Canada would have no jurisdiction. But since EBay *CANADA* does business *in* Canada, with Canadians, with a Canadian headquarters, I think RC has every right to demand sales info for the purposes of tax collecting. Regardless of where EBay chooses to store the data itself. "

If you look at the User Agreement and Privacy Policy - eBay Canada does not run the site or have a relationship with customers using the eBay.ca site. It appears that they don't even own the data. Clearly they don't run the technology or the website - since everyone knows that is the parent - eBay Inc. in the U.S.

So I'm concerned that this ruling says that the Canadian Government can get access to data located and owned by a company outside of Canada - if there is some level of or opportunity for access to that data within Canada.

The even bigger stretch is that this appears to be a nameless request for thousands of records.

Does anyone have any thoughts on this or know if the pattern is accurate from my read of the eBay.ca User Agreement?
November 17, 2008

Colin McInnes said:

User Agreement can't trump law
Interesting Twist:

You cannot get a ".ca" address unless you have a Canadian presence. eBay.ca can claim all sorts of things to try to keep out of being liable for answering to Canadian law, but until they flee back to the US and run everything through a ebaycanada.com address, they have a legal Canadian presence.

The parent company doesn't matter either. If the child company has a presence in Canada, then it has to obey the rules of the country it's located in.

The User Agreement doesn't change anything either. You log in to eBay.ca, you list on eBay.ca, therefore you have a relationship with eBay.ca. It doesn't matter who processes or stores the data, eBay.ca is ultimately responsible for the interaction between you and their designate.

And while it *is* a nameless request, it is for all powersellers registered with eBay.ca. Presumably eBay could legitimately filter out any sellers who do not have Canada listed as their address.
November 17, 2008

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