The CRA's data retention order has been issued as long as it continues from 2023 onwards.
A federal court has ordered Shopify to preserve records in the latest version of its legal spat with the Canada Revenue Agency (CRA) over access to merchant data.
According to the court's ruling, Shopify argues that the CRA's request does not meet the legal criteria.
The tax agency's request for six years of Canadian merchant data from Shopify was fired in June. In November, the CRA appealed the decision, with Finance and National Revenue Minister Francois-Philippe Champagne asking for an order for Shopify to retain data, including from inactive accounts, which would normally be deleted after two years. The Federal Court of Appeal issued the ruling on December 22 while appeal proceedings are ongoing.
The Ottawa-based e-commerce company is opposing a bid to access its data, arguing it does not meet the legal criteria, according to a court ruling. BetaKit has reached out to Shopify for comment.
The court's ruling is the latest update in a legal battle that dates back to 2023, when the Canada Revenue Agency first demanded access to six years of Shopify merchant data. The move was part of the CRA's strategy to crack down on tax violations, such as non-disclosure of online transactions, outlined in the agency's 2022 report.Shadow economy strategy“
The CRA used an “unnamed persons request” (UPR) to request personal information, bank details and business details of Shopify merchants. The agency uses this mechanism to check tax non-compliance by individuals or entities whose identities it does not have. An affidavit written by CRA senior technical analyst Paul Kalil on the case said the agency is “concerned that Shopify 'merchants' may be participating in the underground economy” and failing to comply with tax laws.
CONNECTED: Industry observer says recent Shopify ruling may embolden companies to challenge CRA data requests
When a federal court rejected the CRA's request, it was seen as a surprise victory for Shopify. In the past, the tax agency has used a similar mechanism to access data from companies such as eBay and PayPal. One industry watcher told BetaKit in June that the outcome of the case could prompt other companies to challenge similar CRA requests for customer data.
A federal judge's June ruling said the CRA used “vague and confusing descriptions” and failed to prove that these “Shopify merchants” were a specific group, making the request “unenforceable,” according to court documents.
The Treasury Secretary appealed the decision and soon after filed a motion seeking a temporary order for Shopify to retain merchant data, even data associated with inactive accounts.
Judge Nathalie Goyette approved the Treasury Secretary's request to force Shopify to store its data, but did not award costs to the CRA. This was because, she wrote, the minister's statements were “unclear and did not provide much benefit to the court” and that he asked the court to expedite the decision “after almost two years of delay in filing the application.”
A larger appeal case is pending that will determine whether Shopify must hand over six years of data about its merchants and their transactions.
Disclosure: BetaKit's majority owner Good Future is the family office of two former Shopify leaders, Arati Sharma and Satish Kanwar.
Image courtesy of Shopify.
