The recent announcement by Minister of National Revenue Jean-Pierre Blackburn confirming that the Canada Revenue Agency ("CRA") will begin to enforce the taxation of certain users of popular online marketplace eBay is a wake-up call that tax-related information stored in foreign jurisdictions is not beyond the reach of the CRA if such information is accessed and used within Canada.

The announcement comes after the Federal Court of Canada (later upheld by the Federal Court of Appeal) ordered eBay Canada to provide the names, contact information and sales records of users of its service that sell over $1,000 per month (also known as "PowerSellers") that registered as having a Canadian address. The crux of the decision was whether eBay Canada could properly be ordered to provide such information, given that users' records are collected and maintained by its ultimate U.S.-based parent company, eBay Inc.

The court found that although the eBay Canada website servers and the records of Canadian PowerSellers were not located in Canada, since eBay Canada had accessed and used the information in Canada in respect of its Canadian business, the records must be disclosed to the CRA so as to ensure that Canadian PowerSellers were paying the appropriate taxes on income earned via eBay.

As a result, eBay Canada was required to disclose the records of Canadian PowerSellers to the CRA, which has asserted that it will impose fines and penalties on those who have failed to file income tax returns or report all their income for past years unless they correct or disclose such information under the Voluntary Disclosures Program.

The eBay decision serves as a reminder that even if a person's information is wholly stored outside Canada via the Internet and owned and controlled by another party, if it is used and accessible in Canada, the CRA can seek its production, since such information is considered by the courts as "both here and there".