CRA has several audit projects designed to identify unreported income in certain industries. One interesting, surprising and intrusive method it has for identifying unreported income involves forcing 3rd-party suppliers to disclose their customers’ purchases & identities. For example, Brewers Retail was forced to disclose to CRA sales of beer it had made, including the volumes sold, quantity and price, along with details identifying the customer: MNR v. Brewers Retail Inc., 2018 CarswellNat 7577 (FC).
In the construction industry, RONA was required, over its ardent objections, to disclose customer names and addresses and total annual transactions: Ministre du Revenu national c. Rona Inc. 2016 CarswellNat 5372, [2016] G.S.T.C. 100 (FC), upheld as Rona Inc. v. Canada (National Revenu), 2017 FCA 118 (leave to appeal to SCC refused).
Now, we have the Federal Court allowing a requirement from CRA to Roofmart in Ontario, requiring Roofmart to give:
“[3] For the period January 1, 2015 to June 30, 2018, … those customers whose total annual purchase and/or billed amount is $20,000 or greater. For the period from January 1, 2018 to June 30, 2018, … customers whose total annual purchase and/or billed amount is $10,000 or greater.”
Commonly, CRA would use those details of purchases to compare tax reporting by the identified roofers. Some roofers may not even have filed returns. Others may have reported revenue that would not fit the volume of purchases they made. And, given that it is the construction industry, there may have been significant under-reporting of HST. (See para 4 of the FC decision which notes: “studies … have found that an estimated 28% of the residential construction industry’s business is unreported or under-reported.”
One defensive remedy for roofers, to prevent penalties or prosecution, would be to make a voluntary disclosure to CRA before being contacted by CRA. Of course, if you are a roofer and you don’t meet those purchase targets with Roofmart identified above, you might have nothing to fear.
Since these CRA audit requirements are not new, one might wonder whether contractors have found ways to buy product and get contractor discounts, without giving accurate information about their identities.