UBER has grown to be part of Canada’s transportation landscape. Many Canadians are either earning their income primarily as UBER drivers, or are supplementing their income by driving when not otherwise working. UBER has caused a disruption in the taxi industry by providing a very large pool of potential transportation providers that are easy to access and drive a variety of vehicle. So, with UBER likely here to stay, and more “sharing economy” disruptors likely to appear and dominate, what are the tax consequences of being an Uber driver? Given that taxi drivers have to register for HST/GST and remit this, and (of course) pay tax on their incomes, how are UBER driver’s treated by the tax man?
Almost all UBER drivers are in business, meaning that their earnings are business income. This means that Uber drivers have to report their revenues and get to deduct their expenses come tax time, and they have to pay tax on their profits. The CRA also required Form T2125 to be included with the Uber driver’s tax return. What is less well known is that Uber drivers also have GST/HST obligations.
As of July 1, 2017, the Canada Revenue Agency requires that all UBER driver’s charge and collect GST/HST on each trip and then remit the net tax collected to the government. UBER doesn’t permit individual drivers to charge GST/HST separately, rather the tax is added by UBER on top of the fare. Each UBER driver has to register for and obtain an HST/GST number from the Canada Revenue Agency. This is irrespective of how much the driver earns in a year and whether or not the driver is considered to be a “small supplier” by the CRA.
GST is 5% and HST in Ontario is 13%. This amount must be added to and collected from each ride. The driver gets to deduct GST/HST that was paid on gasoline (or other fuel) used to operate the vehicle while earning money as an UBER driver, as well as the GST/HST for vehicle repairs, maintenance, washes, leases, and purchases. The net amount – the GST/HST collected less the Input Tax Credits claimed – is what has to be remitted to the government.
As technology changes how business is done and life is lived and services are delivered, the tax man has to adjust. There is no such thing as a free ride, not on the CRA’s dime. The sharing economy – whether it is UBER or AirBnB or any of the many other’s in existence – gives rise to tax consequences. Make sure you know your obligations so that your windfall doesn’t turn into a CRA headache.