CRA clarifies that for TOSI excluded-share purposes, a services business can generate revenue from both goods sold and services performed from the same customer on the same job

CRA has provided fresh examples of the calculation of the 90% services test in (a)(i) of the "excluded share" definition in the tax on split income (TOSI) rules. To mention two of the six examples:

  • Where a corporate cleaning business “separately” sells cleaning supplies to some of its customers, but also consumes cleaning supplies in performing its cleaning services, revenues from the former will be respected as not belonging to services revenue, whereas the latter will be included in the services revenue even if charges therefor are separately identified in its invoices.
  • A corporation, that constructs and repairs decks, charges for its materials and labour for each job. Its services revenue is determined by backing out its charges for materials from its total revenues.

Neal Armstrong. Summary of Tax on split income – Excluded shares (CRA webpage), 10 July 2019 under s. 120.4(1) – excluded shares – (a)(i).