Facebook and Instagram will begin collecting sales tax for advertisements purchased at physical offices in Canada.
A spokesperson for Facebook Canada confirmed the change, first reported by The Logic, in a brief statement to Global News on Wednesday.
Facebook is the first major foreign tech company to begin collecting sales tax in Canada. Companies such as Netflix and Google do not collect sales tax, although Google has indicated it would do so if required by law.
The change at Facebook is part of its efforts to embrace a “local selling model,” a Facebook Canada spokesperson said.
“Advertising revenue supported by our local teams will no longer be recorded by our international headquarters in Dublin, but will instead be recorded by our local company in that country,” Dave Wehner, Facebook’s chief financial officer, wrote in a statement announcing the company-wide policy in December.
Wehner said the change will provide more transparency with local governments and policymakers. The policy is being rolled out in local markets throughout the year.
Facebook Canada says it’s working on the new approach now, and that it will be fully implemented by the middle of next year.
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Individual merchants are already expected to collect taxes through Facebook’s Marketplace, and will not be affected by the change.
The Canada Revenue Agency has said internet vendors with no significant physical presence in Canada are generally not required to collect sales tax.
However, the government has come under pressure to exact taxes from internet-focused companies that deliver services in Canada, even if they don’t have a major physical presence. Canadian-based services have said such a change would level the playing field in their battles with foreign tech giants.
The federal government says it’s working with other nations to determine how best to fit new business models into its existing tax framework.
“Our government is committed to working with digital providers and is currently seeking clarity from these companies to determine the way forward,” said Pierre-Olivier Herbert, press secretary for the office of the minister of finance.
A Liberal-dominated House of Commons committee urged the federal government in May to begin collecting taxes from internet giants like Netflix.
The provincial government in Quebec has already passed legislation to tax foreign online services. The government will collect GST from services such as Netflix, Amazon, iTunes and Spotify on Jan. 1, 2019.
Prime Minister Justin Trudeau has said he does not want to implement any taxes that will increase the cost of phone or internet services.
“We’re not going to increase the cost of internet service; we’re not going to impose more taxes on Quebecers, on taxpayers,” Trudeau said during a visit to a Montreal community organization to promote the federal budget in March.
“It’s a promise that we made.”
— With files from The Canadian Press