Shopify has been ordered by a federal court to preserve records in the latest update to a legal spat with the Canada Revenue Agency (CRA) over access to its merchant data.
Shopify argues the CRA’s request doesn’t meet legal criteria, according to the court order.
The tax agency’s request for six years of Canadian merchant data from Shopify was dismissed in June. In November, the CRA appealed the ruling and Minister of Finance and National Revenue François-Philippe Champagne asked for a preservation order for Shopify to retain the data, including from inactive accounts that would normally have been deleted after two years. On Dec. 22, the Federal Court of Appeal granted this order while the appeal case is ongoing.
The Ottawa-based e-commerce company opposes the motion to grant access to its data, arguing that it doesn’t meet legal criteria, according to the court order. BetaKit has reached out to Shopify for comment.
The court order is the latest update in a legal battle that began in 2023, when Canada’s tax agency first demanded access to six years of Shopify merchant data. The move was part of a CRA strategy to crack down on tax non-compliance, such as non-disclosure of online transactions, outlined in the agency’s 2022 “Underground Economy Strategy.”
The CRA was using “unnamed persons requirement” (UPR) to request personal information, banking details, and business data of Shopify merchants. The agency uses this mechanism to check for tax non-compliance by individuals or businesses whose identities it doesn’t have. An affidavit written by CRA senior technical analyst Paul Kalil for this case says the agency had “concerns that Shopify’s ‘Merchants’ may be participating in the underground economy” and were not following tax law.
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When a federal court dismissed the CRA’s request, it was seen as an unexpected win for Shopify. The tax agency had used a similar mechanism in the past to access data from companies like eBay and PayPal. One industry watcher told BetaKit in June that the outcome of the case could encourage other companies to challenge similar requests from the CRA to provide client data.
The federal judge’s June ruling said that the CRA used “vague and confusing descriptions” and failed to show these “Shopify merchants” were an ascertainable group, making the request “unworkable,” according to court documents.
The finance minister appealed the decision, and shortly after, filed a motion seeking an interim order for Shopify to preserve merchant data, even data related to inactive accounts.
Justice Nathalie Goyette approved the finance minister’s request to force Shopify to keep its data, but she did not award the CRA costs. This was because, she wrote, the minister’s representations were “unclear and not of much assistance to the Court” and that he asked the court to expedite the ruling “after having delayed bringing the motion for almost two years.”
The larger appeal case is pending and will determine whether Shopify must hand over six years of data on its merchants and their transactions.
Disclosure: BetaKit majority owner Good Future is the family office of two former Shopify leaders, Arati Sharma and Satish Kanwar.
Feature image courtesy Shopify.