Tax Tip - Tax obligations for ridesharing and delivery services

OTTAWA, ON, April 23, 2024 /CNW/ - The platform economy includes economic activities facilitated by digital platforms, like websites or mobile applications. Ridesharing and delivery services are two common activities in the platform economy sector. These activities are part of different areas of the platform economy, and come with different tax obligations.

Ridesharing is part of the sharing economy and consists of an arrangement where the driver of a  vehicle provides transportation services to customers, facilitated by a mobile app or website. Popular ridesharing apps include Lyft and Uber.

Rideshare drivers are generally considered self-employed and have unique tax obligations compared to those of the other platform economy categories.

Whether you're a rideshare driver on a full-time basis, or as a side job, you must report all of your income, including tips, on your income tax return.

As a self-employed individual, you may claim business expenses such as fees the platform keeps for administrative and maintenance purposes and other goods and services you purchase to earn income.

You must register for a GST/HST account the moment you start earning money from ridesharing services.

You must charge, collect and remit GST/HST to the CRA or elect with the platform to have the platform collect and remit taxes on your behalf by jointly completing, and signing GST506 Election and Revocation of an Election Between Agent and Principal and ensuring you and your platform operator make it available to the CRA upon request. You may claim input tax credits for GST/HST you pay on expenses you incurred for providing ridesharing services.

As part of the gig economy, delivery services are short-term contracts where mobile apps or websites are used by self-employed drivers for delivering goods to end consumers. Commonly used delivery apps include UberEats, SkipTheDishes, and Instacart.

Delivery service drivers who work independently for delivery apps are considered self-employed contractors with unique tax obligations.

Whether you participate in providing delivery services on a full-time basis, or as a side job, you must report all of your income, including any tips you earn, on your income tax return.

If you are considered to be self-employed, you may claim business expenses such as fees the platform keeps for administrative and maintenance purposes, as well as other goods and services you purchase to earn income.  

Generally, if you only provide delivery services, you must register for a GST/HST account, and collect and remit taxes once you earn $30,000 over four calendar quarters. You may choose to register for a GST/HST account even if you make less than $30,000. You may claim input tax credits on the GST/HST paid on expenses incurred for providing delivery services.

Here's how your tax obligations differ if you're a rideshare driver, delivery service driver, or both:

Whether you participate in one area of the platform economy or multiple, it is essential that you keep organized books and records to report your income and GST/HST, and to claim your eligible expenses.

If you have not reported your income from ridesharing and/or delivery services in previous years, you may have to pay penalties and interest in addition to the tax on the unreported income. By correcting your tax affairs voluntarily, you may avoid or reduce penalties and interest.

To correct your tax affairs (including corrections to GST/HST returns) and report income you did not report in previous years, you may:

• Ask for a change to your income tax and benefit return
• Adjust your GST/HST return
• Submit an application through the Voluntary Disclosures Program. If accepted, you will receive prosecution relief, and in some cases penalty relief and partial interest relief that you otherwise would have had to pay.

To find more information on the platform economy, refer to: Taxes and the Platform Economy. 

• Taxi operators and commercial ride-sharing drivers
• Motor vehicle records - Canada.ca
• Calculate input tax credits - ITC eligibility percentage - Canada.ca
• Classes of depreciable property - Canada.ca
• Depreciation (CCA)

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SOURCE Canada Revenue Agency