Court filings show CRA wants Shopify’s customers’ banking, sales data

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OTTAWA – Recent court filings by the Canada Revenue Agency reveal a picture of just how comprehensive the data are that CRA and its Australian counterpart want to obtain on their respective countries’ Shopify merchants as the CRA continues a year-long court battle pry out detailed information from the e-commerce company about its customers to find out if any aren’t properly paying their taxes.

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An excerpt of a 2023 affidavit by CRA senior technical analyst Paul Kalil lists 16 categories of information the government is seeking on Shopify’s Canadian account owners, ranging from their bank account information and total transaction value each year to the owners’ birth dates and social insurance numbers.

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Last year, the CRA filed two requests to the Federal Court asking that Shopify be compelled to hand over data. The first request, called an unnamed persons requirement (UPR), seeks extensive information such as the identity, transaction records and sales amounts of Canadian-resident merchants that used the e-commerce platform in the last six years.

The second UPR was filed on behalf of the Australian Taxation Office, which seeks data about all Shopify merchants with Australian billing addresses between April 1, 2021, and March 31, 2022.

Despite a UPR being a legal tool the CRA can use as long as its request meets certain criteria and is approved by a judge, Shopify’s COO last year accused the agency of trying to obtain information via a “backchannel” at the time and vowed to fight the “outrageous” requests.

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One year later, both UPRs are meandering very slowly through the Federal Court as both parties argue over what data Shopify can or can’t provide to the tax agency in a reasonable time.

Much of the non-financial information, if successfully obtained, will likely be used to match shop owners’ information with CRA files to then verify if those merchants declared all their business income to the government.

The UPR filed on behalf of the Australian government is less comprehensive and only seeks eight categories of information, such as a Shopify store’s legal name, contact information, email and postal addresses, as well as total revenue for sales to customers in Australia.

But in both cases, Shopify argues that it doesn’t keep much of the information requested.

“For almost all Store Owners, the information requested in the Canadian UPR is not available to Shopify in its tax ‘books and records’ or otherwise,” reads an affidavit by Shopify vice-president of product Mani Fazeli.

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More specifically, the company says it doesn’t have all of the data in 13 of the 16 categories of information on Canadian merchants the CRA wants. It says that to extract all the information requested that it does have would be an extremely time-consuming and costly endeavour because it would involve manual review of “hundreds of thousands” of accounts with a Canadian address.

“Overall, it would be extremely burdensome and time-consuming for a Regulatory Analyst to conduct the manual review of documents and information necessary for Shopify to respond to the Canadian UPR,” Shopify regulatory analyst Anna Lee wrote in a recent affidavit.

It also says it doesn’t have three of the eight categories of information requested by the Australian government.

But the CRA has said it doesn’t believe the company.

In a recent filing asking the Federal Court to override Shopify’s objections against answering precise questions about a data-retrieval software it uses, called Mode, the agency’s lawyers questioned if the company couldn’t, or simply didn’t want to, provide the requested information in the UPR.

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“Shopify says that it has limited information. The Mode questions test this position,” the agency wrote.

“Knowing what information Shopify was able to retrieve through its custom-built Mode reports would assist the Court in understanding the scope and types of information that Shopify collects, maintains, and provides in response to legal information requests, and whether this information is associated with an identifiable person or business.”

The court filings also reveal that CRA and Shopify officials had multiple email exchanges and at least one in-person meeting to discuss what information the company held on its clients before the agency filed its UPRs.

CRA did not provide a comment on the ongoing litigation by deadline Thursday. Shopify did not respond to emailed questions Thursday.

Last year, National Post reported that the agency’s requests to Shopify are part of a larger effort to fight tax non-compliance by taxpayers who make money operating a business on e-commerce websites.

Documents also showed that CRA’s auditors that focus on high-net-worth individuals and businesses had received requests from both France’s and Australia’s tax authorities for information on Shopify’s merchants. The documents said both countries’ governments were auditing unspecified Shopify merchants as well as the company itself.

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Recent court filings show the Australian Taxation Office (ATO) had reached out to Shopify directly in late 2022 asking for data on its merchants with Australian addresses, but the company refused to provide any information without a valid court order or warrant. That’s what forced the ATO to turn to CRA to obtain the data via a UPR.

National Post

cnardi@postmedia.com

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