Apple starts charging sales tax on subscriptions and purchases in Canada

Apple starts charging sales tax on subscriptions and purchases in Canada Regulations seem to be a big theme for 2019, and there will be even more scrutiny on companies like Apple from a tax, privacy and antitrust perspective. A new sales tax in Canada has already set the ball rolling for Apple this year, and we can expect to hear more of the same going forth.

In our Subscription Business Trends for 2019 blog, we predict that regulations are going to catch up with subscription-based businesses this year. Well, the impact is already being felt in Canada as tech giant Apple began charging sales tax for all Apple Music subscriptions and iTunes purchases from the start of the year. Apple users will have to pay GST, HST, PST or QST on their purchases and subscriptions, depending on the territory or province.
 
Initially, Apple did not make any announcement regarding this change, prompting much speculation and comment about invoices not matching up with the expected charges. The company later made its public announcement regarding compliance to the Canadian sales tax regime. Before the new policy, Canadian customers were only subject to sales tax on App Store purchases. These new taxes are also applicable to other businesses such as Amazon, Netflix and Spotify.
 
These new digital sales tax rules seem to be an effort by Canadian regulators to bring in more revenue and put domestic companies on a level playing field with the multi-national giants. Many of these big companies have often been criticised for taking advantage of tax benefits stemming from their presence in multiple locations.
 
And it’s not just Canada that’s looking to regulate these tech giants. Recently, Japan also announced that it plans to tighten regulations on the technology companies, including Apple, Google, Facebook and Amazon. The country wants to have better control of competition and privacy.
 
Tim Cook, though, seems to be prepared for stronger regulations. He has said that the free market is not working for the tech industry, especially when it comes to privacy. Tech companies, including Apple, are also backing a federal privacy regulation in the US soon. This issue has come to the fore after the data scandals which rocked the world last year.
 
Apart from the tax front and questions on privacy, Apple is also struggling with a Supreme Court lawsuit in the US, which will determine whether the Cupertino giant can continue charging a 30% transaction fee from other companies for App Store subscriptions. This will potentially have a huge impact on its bottom line as the company looks to grow its services business.
 
It’s set to be an interesting year for Apple as it moves away from its core positioning as a hardware business. Regulations, though, will present a significant challenge for the company and Apple’s success in 2019 may well be defined by how it overcomes these roadblocks.