Tuesday, January 10, 2012

Adventures in taxation: Apple's App Store versus Google's Android Market

I recently went through the process of registering to distribute paid applications in both Apple's App Store and Google's Android Market. I could talk about those processes, but that's not what this post is about. Wait, I couldn't talk about Apple's process anyway, as that agreement explicitly forbids discussing said agreement.

Anyway, this post is about taxes, not about how fast Google's approval process was (pretty fast) or how slow Apple's was (longer but not really that long), or about how Google did the bank account verification but Apple didn't, or about how Apple actually walked me through the banking information whereas Google just said "enter all the numbers"... ok, really, I'm not talking about those items.

I am not a tax lawyer or accountant, so I may well be completely wrong here, but my research so far indicates to me that if I put an app in an appstore (or sell a subscription to web-based service) I am required to charge GST/HST to customers based in Canada. If the customer is not in Canada, I do not need to charge any tax. So, how do I arrange to do that?

With Apple, the path is to fill out the appropriate paperwork such that Apple can collect the taxes and submit them appropriately. Once they have processed those forms, Apple will charge the GST/HST on any paid apps I sell and submit that tax to the Canada Revenue Agency. I no longer have to worry about it.

With Google, it isn't so simple. I need to tell Google the rules about how much tax to charge depending on the location of the buyer and I'll have to deal with submitting the tax to the Canada Revenue Agency. I suspect this works better for larger companies (where Apple's one-size-fits-all mechanism doesn't work) but as a simple one-location seller Apple's approach is simpler for me. I wonder how Apple deals with organizations that have multiple locations and therefore don't have simple rules for which tax to charge where?

Now I need to figure out whether I can just charge GST for Google or whether I need to actually have a different per-province rate. Since Google seems to support per-province tax rates, I'm thinking that it is the second. I mean, if you look at the rules, they're quite simple. Here's an excerpt (from GST/HST Technical Information Bulletin B-103 [53 pages]):

If the Canadian rights in respect of a supply of intangible personal property (other than a supply of intangible personal property that relates to real property or tangible personal property or a supply of intangible personal property that relates to services that is deemed to be made in a province based on the place of supply rule that is explained in Part IV of this section), can only be used primarily (more than 50%) in the participating provinces, the supply is proposed to be made in a participating province if an equal or greater proportion of the Canadian rights cannot be used in another participating province.

I applaud the Canada Revenue Agency for the crystal clarity of their online documentation. But I think I'll seek professional advice, just to be safe.


  1. Hi.

    I stumbled on this post while searching in vain for some clarification on sales tax in the Google Play Store.

    I have an Android app that I'd like to begin selling, and I'm confused about the sales tax procedure. Like you, I'm in Canada.

    Did you ever find a site that explains clearly the tax requirements for Canadian developers (what to charge, what to remit, etc.)? If so, could you post it here?

    1. In the end I decided to defer the Android application until later. I have not needed to resolve the tax questions yet.

      If you do find such a site, I'd love to hear about it!

  2. I realize this is a very old post, but are you sure that is what is happening on Apple's end?

    The thing that I find confusing is that Apple sends out these stupid GST/HST tax advice PDFs every month that seem to be indicating that they are only paying the taxes on their 30% commission portion of the sale.

    1. I no longer have any paid apps in the App Store but I remember those confusing PDFs. My recollection of the situation is that Apple doesn't charge the end customer the tax on top of the price: instead they take it out of their commission, and that's what the PDF is indicating. From an tax accounting perspective the customer is considered to have been charged a lower price and had the tax added on to result in the App Store price, which results in numbers that don't seem to add up at first.

      Lawrence MacFadyen at http://www.iosinsight.com/tax-setup-non-us-resident/ appears to support my memory of the situation:

      "There is plenty of confusion as to how GST/HST is handled by Apple and yourself as the developer. It is actually quite simple. The form you fill out is agreeing that Apple will charge GST/HST on your behalf, and remit it to the CRA. Instead of actually charging the GST/HST for your customer, Apple absorbs this amount from their commission. The makes it easier for you, because Apple pays CRA the GST/HST on your app sales, and therefore you do not remit GST/HST on the income earned."