Earlier I wrote an article on different online business models, I would classify this new strategy as a subset of eCommerce called, Social Commerce.

Although ecommerce and social networking tools have been around for over a decade, the combination of them to the net effect on price adjustments is a relatively new development.  Wikipedia defines Social Commerce as an online media that supports social interaction and user contributions to assist in the online buying and selling of products and services.  I would add that Social Commerce also may affect the cost of online buying and selling through for instance, customer ratings, reviews, user recommendations and referrals, social shopping tools, forums, and others.

This new ecommerce angle utilizes the popularity of a product with the principles of economy of scale, and gives the power to the customer.  Though more safeguards would need to be implemented to protect from abuse, the idea is gaining momentum and is a great way to launch new products and receive feedback.

I have seen smaller companies implement social commerce, but not yet in the more well known brands.  With the marketing budgets supporting many of the big brands, this could really add a boost to a brand’s web presence.

With some great PR, this new model could go mainstream and be the future of ecommerce. Let’s see how long it takes.

As an Ontario or British Columbia business owner you may already be considering the effects of the Harmonized Sales Tax (HST) on your company come this summer.  In the broadest of terms, many businesses with supplies, services, and transactions made in Ontario or British Columbia that are currently registered for the 5% GST will be required to collect 13% HST in Ontario ( 8% PST + 5% GST) and 12% HST in B.C. ( 7% PST + 5% GST ), effective July 1, 2010. Though still a few months away, businesses should already be devising their plan of action for the transition.

In order to assist you with your integration process we’ve assembled a basic checklist that should shed some light on aspects to consider:

• Determine if the nature of your business will require you to adjust to the 12% or 13% HST. The government’s website provides a high-level overview of taxable and exempt goods and services.

• Evaluate the impact of the harmonized sales tax on your company’s budgets. Review your projected expenditures, perhaps it’s more beneficial to delay some projects till after June 2010 when you’ll be in a much more advantageous position to recover the provincial component of the tax paid.

• Review on-going and future contracts, agreements, and any promotional material to ensure that your operating-costs are defined to include the combined tax.  New contracts that will extend beyond July 1, 2010 will need to have these modifications in place. Keep this in mind in the early transition period.

• Identify the changes required to convert your accounting and point-of-sale systems to charge or pay HST, i.e. invoices, sales receipts, purchase orders, etc.

• If you have an ecommerce website, update your payment process to charge HST, where applicable.

• Reconfigure billing systems to collect GST and PST, as well as HST early enough in the transition period.

• Give your customers a heads up. A lot of businesses are concerned with the effect HST may have on sales due to the increase in pricing. One of the ways to address your customers’ concerns is by highlighting some of the pertinent benefits of the tax reform.

Probably the most intricate aspect of the transition period will have to do with maintaining accurate bookkeeping for agreements signed before June 30, 2010 but with goods or services delivered after that date. Any service or portion of service performed on or after July 1, 2010 is subject to HST, unless the portion is less than 90% of the service.

Using our company as an example, here’s how the Ontario HST charges would apply. A client signs a contract with us in May 2010 to design and develop a website for them.  The entire project takes 50 hours to complete, 30 hours before June 30/10 and 20 hours after. This means that the 20 hours of design and develop time spent on and after July 1/10 are subject to the 13% HST, regardless of when the contract was signed.  To throw a bit more math into the mix, if less than 5 hours are spent on the project after June 30/10, this time is HST exempt as it is less than 90% of the service.

Like any hefty initiative, it’s best to approach HST integration in small, reflective steps. That’s why we suggest that you start preparing your business early on. There are plenty of resources available including seminars throughout Ontario and B.C. By getting your business HST-ready ahead of time you’re not only more likely to foresee any extraneous circumstance but you’re also more likely to still enjoy some of your summer.

For retailers who manage their own website, this is a can’t miss event. However, for those who did miss it, here is a quick recap of the main topics.

Large US retailers like Best Buy, Lord & Taylor, and the Hard Rock Cafe, to name a few, showcased their websites and discussed elements that are working and some that aren’t.

Many discussions geared to remind Internet retailers about proper usages of navigation and its usability, including shopping cart clarity. This had to do with  really going back to the fundamentals.  These days, customers are more Internet savvy and expect a certain level of familiarity as well as functionality.

Where cost is no longer a major barrier, product reviews and videos are paramount.  The benefits of implementing these types of added features are huge and improve conversion rates drastically.

Even small adjustments to components of a product page and shopping cart with  continually testing have shown results of strong returns to sales growth.

Kurt Peters, Editor in Chief of Internet Retailer, said that mobile will be the future of ecommerce.  Most mobile websites are still in early testing mode, but it’s already evident  that providing customers with information at the time they want it, no matter where they are, is of high importance and advantage.

Many presenters at the Conference talked about new features they focused on during their recent site re-designs. The process ranged on average from 10 to 12 months from beginning to end. Interesting to note is that majority of the retailers teamed with an external web design company or technology provider to help with new implementations.

Lastly addressed were our still early days of social media integrations of Internet retailers with sites like Facebook and Twitter.  Some retailers are providing very timely product announcements and discounts through these social sites while others are building communities around their sites’ topics and themes.

As an owner of a website solutions company, the conference really echoed what I come across every day.  Getting the core fundamentals and best practices properly implemented is key. With a sound foundation in place, the next step is to add one feature at a time while testing and monitoring its effects to website analytics and sales to guide the way.

9th sphere’s ecommerce clients will be receiving a briefing of key statistics and features their categories’ counterparts are undertaking.

• eMetrics along with SMX Search Analytics, “eMetrics Marketing Optimization Summit” Toronto Ontario, March 29th to April 1st, 2009 – Internet marketing analytics conference

• Web Analytics Association Base Camp Overview – Toronto, Canada, March 29-30th, 2009 – Internet marketing analytics conference

• mesh, Toronto April 7 – 8, 2009- online social media conference

• Canadian Online Travel Conference, Niagara Falls Ontario April 13-15, 2009 – online marketing conference for travel industry

• The Atlantic Internet Marketing Conference, Halifax, April 22-24, 2009 – Internet marketing conference

• Search Engine Strategies – Toronto June 8-10, 2009 – search engine marketing & optimization conference

Conferences are typically organized around focused topics with a few presenters within each session.  A question and answer period ends off each session giving you the opportunity to clarify anything addressed.  Make sure to find out where the after-parties are taking place so you can take full advantage by networking with some of the presenters and attendees.

If we’re missing any upcoming conferences from our list,  please let us know.

For more information visit http://www.pm.gc.ca/eng/media.asp?category=1&id=1952 or find out if you are billing GST correctly on Internet sales.

Although sellers’ information is controlled by US based eBay Inc. and stored on a US server, the Federal Court of Canada ruled that eBay is nevertheless required to provide this information.

The Globe and Mail reports that Canadians spent about $5 billion online each year, a quarter of which represent eBay’s total sales. However, Statistics Canada reports $39.2 billion CAD spent online in 2005, that’s 38.4% up from 2004.

According to eBay, the site was visited by approximately 11 million Canadians this past August.

The issue of double taxation is sure to become a cumbersome topic, since many sellers auction used goods. Meanwhile companies that sell through eBay may now need to re-evaluate their profit margins.

Take it away David…

If you’re collecting GST when you don’t need to, you’re pricing your product too high. And if you’re not collecting GST or HST when you should, you’re setting yourself up for a very expensive assessment if you’re audited by the Canada Revenue Agency (CRA).

I’ve seen many CRA assessments in the hundreds of thousands of dollars, totalling up the GST not collected over four years and adding interest and penalty. And pleading ignorance will not get you out of the assessment! Your business could be ruined (and, if it’s incorporated, you can be personally liable as a director).

Unfortunately, the GST is horrendously complex. This article may seem technical and complicated, but it’s actually highly simplified and doesn’t cover all the special rules. You should obtain your own professional advice about your business to ensure that you’re handling the GST/HST properly.

General Rules
In general, if you’re based in Canada, then unless an exception applies, all your sales are taxable under the GST/HST. You must collect and remit 6% GST, or 14% HST in Nova Scotia, New Brunswick or Newfoundland & Labrador (the HST provinces). You also get a refund for all the GST or HST you pay on your business purchases, in the form of “input tax credits”.

Once you (combined with others in your associated “group”, such as any companies you control) have total annual sales exceeding $30,000, you must register for GST and charge GST (or HST) on your sales.
Some goods are always GST-free - for example, most groceries and medical devices.

For web sales, the primary way for sales to be GST-free is sales to non-residents. However, some sales to non-residents are taxable, as we shall see.

Before you can determine whether your sale is taxable, you have to know what it is: “goods”, “services” or “intangible property” (such as a right to something). This can be a very complex determination. For example, shrink-wrapped software is goods, a software download is intangible property, and web site hosting is considered a service.

For web sales, see CRA Technical Information Bulletin B-090, “Electronic Commerce”, on cra.gc.ca.

Goods
If you’re selling goods (technically called “tangible personal property”), then you do not collect GST if you are shipping the goods out of Canada, regardless of whether the billing address is in Canada. (Keep good records to prove you exported the goods!) If you ship goods to an HST province, you must charge 14% HST, even if you’re shipping from a non-HST province (e.g., you’re in Ontario and the customer is in Nova Scotia). Shipping costs take on the same status as the goods for tax purposes.

(You may also need to collect provincial sales tax, depending on what province you’re in and where your customer is.)

Services
Most services supplied to non-residents are GST-free. “Supplied to” refers to who is liable to pay (i.e., who you are billing), not who benefits from the service. Determining who is a non-resident is a complicated question, but in most cases, a billing to an address outside Canada identifies a non-resident.

There are some exceptions, such as if the customer is in Canada while dealing with you, or where the service relates to property in Canada. Such services are normally taxable.

Once a service is taxable, if you perform the service in an HST province it is generally taxable at 14%, while if you perform it in another province it is generally taxable at 6%, regardless of where in Canada the customer is. There are some complex exceptions to this rule.

Intellectual Property
If you are supplying intangible property which is also “intellectual property”, such as a copyright, patent, trademark or trade secret, or a right or licence to use such property, then there is no GST provided your customer (the one liable to pay) is non-resident and is not registered for GST. If the customer is GST-registered (some U.S. businesses are), you must charge GST.

So, for example, if an unregistered non-resident pays to download software from your web site, there is no GST, because they are paying for a license to use your intellectual property.

Unfortunately, this rule does not extend as far as you might think. In the recent case of Dawn’s Place Ltd., the Federal Court of Appeal ruled that payments by U.S. customers to a Canadian website to download adult images and videos were taxable. (But see the next section below.) Dawn’s Place argued that it was providing copyright to the downloaded images, but the Court ruled that granting a right to download an image is not the same as granting a copyright.

New Rule! Other Intangible Property
In response to the Dawn’s Place case and other complaints from the industry, the Department of Finance announced in the March 19, 2007 federal budget a new rule: all intangible property will be GST-free when billed to non-residents who are not GST-registered. If the customer is an individual, they must be outside Canada at the time of the sale. Again, there are some exceptions, such as intangible property that relates to property in Canada or to a service that is taxable.

This new rule is currently before Parliament in Bill C-52, Once enacted, it will be retroactive to the introduction of the GST in 1991, but will not apply if you charged or collected GST. (If you were assessed for not collecting such GST in the past, you will be able to get a refund.)

More Information
CRA web site - see Technical Information Bulletin B-090 for detailed information on website sales. However, note that the new rule introduced by the March budget has not yet been passed by Parliament and will likely not be included in Bulletin B-090 for some time even though it is already effectively in force. See the Budget 2007 information for information about the new rule.

And consult your professional accountant or lawyer for specific advice on your business. You don’t want to risk being ruined by an assessment for four years of uncollected taxes!

By David M. Sherman, LLB, LLM
Tax Lawyer & Author

As the GST/HST reduction deadline approaches, be sure to update your automated tax calculations within ecommerce, online ordering, or invoicing web applications.

Contact your website developer in advance to ensure this update is scheduled to be completed for July 1st.

For more information, visit The Canada Revenue Agency website. Information on when to apply the new rate and how to apply it to sales promotions is included.

To improve customer trust in your website, and therefore increase sales, the following should be implemented.

• Have an SSL (secure socket layer) on any page of your website that asks for personal information. This is a type of security technology that is installed on your hosting provider’s server. It’s used to encrypt data that is sent through the browser to the server in order to significantly reduce the likelihood of someone intercepting the data. You will know an SSL has been added to the web page when the address starts with https:// instead of the typical http:// protocol. A yellow lock will be displayed on the bottom right of your browser. Your website should clearly display the SSL seal / certificate. Many website hosting providers provide a free-shared SSL, but tests have shown that having your own SSL allows higher conversion rates than the free-shared alternative.
• Add the Hacker Safe seal. This is a program which scans your website host’s network for known vulnerabilities. The providers of the Hacker Safe seal report an average sales increase for small and medium sites of 15 to 20%.
• Clearly display return policies, privacy policies, and guarantees. If your return policy is brief, add it to your shopping cart’s checkout page, otherwise have it open in a new window via a link. Be sure to comply with the codes of any other countries, provinces, states, and in some cases specific industries, that you sell in. Canadian companies need to comply with PIPEDA, Canada’s privacy act. Display your guarantees upfront.
• Add your full contact information, including phone number, address, and email, preferably to every page.

Tests have shown that having all the above elements significantly reduces checkout abandonment and increased conversion rates. Removing a major deterrent gives your visitors more confidence in your website, which will no doubt increase the appeal of choosing your website for online buying.