Direct sellers in the US have a “safe harbour” which does not exist in Canada. Specifically, section 3508 of the US Internal Revenue Code expressly excludes the salesforce from the definition of “employee” for federal tax purposes! By contrast, direct sellers operating in Canada need to be proactive about making sure that the salesforce stays on the right side of the employee – independent contractor divide, which is a “common law” test in Canada.
The recent Tax Court of Canada (“TCC”) case of Mazraani provides a good refresher – and some positive comments for Canadian direct sellers – on the difference between employees and independent contractors.