Tax On A Price Nobody Paid

Most GST/HST rules ask who supplied what to whom. This one starts from the observation that a direct selling business may have tens of thousands of people selling its products, almost none of whom will ever file a return, and builds a collection mechanism around that fact.

A Note On Currency

Everything here is stated as verified in August 2026 and requires confirmation before reliance.

The primary sources used are CRA GST/HST Info Sheets GI-125 and GI-126, both dated April 2012, and GST/HST Memorandum 14.1[1][2][3]. Those are old publications and may have been superseded; we did not establish whether more recent guidance exists.

We did not read the Excise Tax Act provisions governing the method, and CRA's own memorandum carries a disclaimer that the information does not replace the law found in the Act and its Regulations[3].

We did not obtain Info Sheet GI-052 on the Network Sellers Method, and our account of that method comes from the two info sheets that mention it and from secondary commentary.

This is not tax advice. Whether a particular business or contractor is within these rules depends on the structure of the arrangement and on whether approval has actually been granted.

The Structure Being Taxed

The commercial arrangement the rules respond to.

CRA describes the industry as businesses that generally sell their products either directly to consumers through commission-based sales representatives, or to independent sales contractors who in turn sell the products to other ISCs of the direct seller or to purchasers[1][2].

Its memorandum describes the method as applying to direct sellers who distribute exclusive products to purchasers through independent sales contractors rather than through retail establishments[3].

Commentary names the kinds of business involved, giving examples such as Tupperware, Avon and Norwex[4].

Two features of that structure drive everything else, and this is our own analysis.

The selling population is very large and very small-scale. Each participant may buy a few thousand dollars of product a year and sell it to people they know.

And the product moves through several hands before reaching a consumer, since an ISC may sell to another ISC as well as to a purchaser[1].

Under ordinary rules each of those transfers would be a supply, requiring each participant to consider registration, charge tax, claim credits and file. The method exists to avoid that, and the price of avoiding it is what this article is about.

Two Methods, Not One

A distinction that is easy to miss and determines which rules apply.

CRA states that to simplify the operation of the GST/HST, two methods are available to businesses in the direct selling industry: the Network Sellers Method and the Alternate Collection Method. Depending on their business structure, they may qualify to use one or both[1].

The Network Sellers Method is described as available to businesses that sell their products to consumers through sales representatives who receive commissions for arranging for the sales[1].

The Alternate Collection Method is described as available to businesses that sell their products to distributors or ISCs who in turn sell to other ISCs of the direct seller or to purchasers[1].

CRA states the consequence plainly: persons involved in selling products of a direct selling business may be sales representatives or ISCs for GST/HST purposes[2].

That is the first thing a participant needs to establish about their own position, and this is our own observation about why it is frequently unclear.

The commercial language of the industry does not track the tax distinction. Titles like consultant, representative, ambassador, partner and advisor are used interchangeably across companies whose underlying structures are quite different.

The tax question is not what you are called. It is whether you buy the product and resell it, or whether you arrange a sale and are paid a commission.

Which One Applies To You

The operative test, drawn from the two descriptions above. This section is our own analysis.

An independent sales contractor buys. Title passes to them, they hold inventory, they sell it on, and their return is the difference between what they paid and what they receive.

A sales representative arranges. Title passes from the company to the customer, the representative never owns the goods, and their return is a commission.

Three practical markers that distinguish them.

Who bears unsold stock. An ISC who cannot sell an item is left holding it. A representative who fails to arrange a sale simply earns nothing.

How the money flows. An ISC pays the company and collects from the customer. A representative's customer pays the company, which then pays the representative.

Who sets the resale price. An ISC reselling their own goods can price them, which is what makes the discount arithmetic below matter. A representative cannot, because it is not their sale.

Many arrangements contain elements of both, and some companies operate both models simultaneously, which is why CRA contemplates a business qualifying for both methods[1].

A participant who cannot tell which they are should ask the company directly and get the answer in writing, because the two methods have materially different consequences.

Nothing Works Without Approval

The precondition, which is absolute.

CRA states that before they can use the ACM, the direct seller must apply to the CRA, either alone or jointly with one or more of its distributors, for approval to use the method, and must have been granted approval[2].

Its other info sheet describes the application as being made solely by the direct seller, or jointly with one or more of its distributors, with all parties involved in the application able to use the method upon receiving approval[5].

Commentary likewise describes direct sellers as able to apply to CRA to use the method[4].

Three observations, ours.

This is not an elective treatment a participant can adopt. It is a permission granted to a specific business on application.

The approval is held by the company, not by the contractor. An ISC cannot apply for it, cannot verify it from public records so far as we could establish, and is not a party to it.

And approval can be joint with distributors, which means that within a single company's network some distributors may be approved and others not. CRA addresses that case explicitly, as the section on non-approved distributors below describes.

The practical instruction is that the first question for anyone in this industry is whether the company they sell for has approval, and the second is whether their own upstream supplier is covered by it.

How The ACM Works

The core rule, in CRA's words.

When an approval is granted to a direct seller, the approved direct seller charges the ISC the GST/HST on the suggested retail price of the exclusive product sold to the ISC, even if the approved direct seller charges a lower price to the ISC[5].

The parallel info sheet puts it as the approved direct seller or approved distributor charging the ISC tax on the suggested retail price even if the ISC pays a lower amount[2].

Commentary states the same in aggregate terms: direct sellers charge and account for the tax on the suggested retail price of the products as if they had made the sales directly to consumers[4].

That last formulation explains the design, and this is our own reading.

The policy objective is to collect, once, the tax that would have arisen on the eventual retail sale to a consumer, and to collect it at the only point in the chain where there is a registrant capable of remitting it reliably.

So the tax base is the retail price, because that is the sale being anticipated. And it is collected from the ISC at purchase, because that is when the ISC deals with the company.

The mechanism is coherent. Its cost falls on the ISC, and the sections that follow quantify it.

What Suggested Retail Price Means

The definition, which is precise and matters.

CRA defines it as the lowest price before tax published by a direct seller for sale to purchasers, and states that it is usually the price set out in a direct seller's catalogue of products[2].

Two elements of that definition repay attention, and this is our own analysis.

It is the lowest published price, not the headline one. Where a company publishes a promotional or sale price, that appears on its face to be the relevant figure, which works in the ISC's favour.

And it is published by the direct seller, which means it is not affected by anything the ISC does. An ISC who intends to sell at a discount, or who is buying for personal use, is charged on the published figure regardless.

The practical consequence is that the tax base is set by the company's catalogue, which the ISC does not control and which may change between order and delivery.

An ISC checking whether they have been charged correctly needs the catalogue in force at the time of the supply, which is a record most participants do not keep.

Shipping And Handling Is Inside The Base

A small detail in the definition with a disproportionate effect.

CRA's definition of suggested retail price ends by stating that it includes any amount set out for shipping and handling[2].

Three consequences, ours.

The tax base is larger than the product price, by whatever the catalogue sets out for delivery.

Shipping and handling in this industry is frequently not discounted to the ISC in the way product is, so this component tends to be charged at close to its published amount in any event.

And it means the base cannot be derived from a product list alone. An ISC reconciling a supplier invoice against a catalogue price will find a difference and may wrongly conclude they have been overcharged.

We would put this in the category of details that are easy to overlook and unhelpful to discover during an examination. It is stated in one clause of one definition in an info sheet from 2012, and it changes the number.

The Arithmetic On A Hundred Dollar Product

What the rule costs, computed by us on a suggested retail price of $100 at a 13 percent rate.

At a 15 percent ISC discount, the contractor pays $85.00 and is charged $13.00 of tax rather than the $11.05 that the price they paid would produce, an overcharge of $1.95, for an all-in cost of $98.00.

At a 25 percent discount, they pay $75.00 and bear $13.00 rather than $9.75, an overcharge of $3.25, all-in $88.00.

At a 35 percent discount, they pay $65.00 and bear $13.00 rather than $8.45, an overcharge of $4.55, all-in $78.00.

At a 40 percent discount, they pay $60.00 and bear $13.00 rather than $7.80, an overcharge of $5.20, all-in $73.00.

The pattern is worth stating explicitly because it is counterintuitive.

The better the discount, the larger the absolute overcharge. The tax is fixed at the retail figure while the price paid falls, so the gap between them widens with every additional point of discount.

A contractor who negotiates or earns their way to a deeper discount tier is therefore capturing less of it than the headline suggests, and the rate in a participating province at 13 or 15 percent makes the effect larger than the same arrangement would produce under GST alone.

The Resale Squeeze

The consequence that matters commercially, computed by us at a 25 percent discount on the same $100 item.

The contractor's all-in cost is $75.00 paid plus $13.00 of tax, being $88.00.

Selling at the suggested retail price of $100.00 produces a margin of $12.00.

Discounting to $95.00 produces $7.00. To $90.00, $2.00. At $88.00 the margin is nil. At $85.00 the contractor is $3.00 down.

So the break-even resale price is $88.00, which is 17.3 percent above what they paid and only 12 percent below suggested retail.

That last figure is the finding, and it is ours.

A contractor on a 25 percent discount believes they have 25 points of room to price with. In cash terms they have about 12, because the tax charged on the retail price has already consumed roughly half of the discount before anything is sold.

This matters because discounting is normal in this industry. Product is sold to friends, at parties, in bundles, and at seasonal promotions, and a contractor pricing off their purchase price rather than their all-in cost will pass break-even without noticing.

The tax is not the cause of a bad margin. It is the reason a margin the contractor believes is 25 percent is actually about 12.

What It Costs Over A Year

The same effect at scale, on our own figures, for a contractor buying $40,000 of product measured at suggested retail.

At a 25 percent discount they pay $30,000 and bear tax of $5,200 rather than the $3,900 their actual cost would produce, an extra $1,300.

At a 35 percent discount they pay $26,000 and bear the same $5,200 rather than $3,380, an extra $1,820.

Two observations, ours.

Those amounts are real cash costs to a small operator, and for many participants in this industry they are a significant fraction of annual profit.

And they are invisible in the ordinary course, because the tax appears on the supplier invoice as a single line computed by the company's system. Nothing on the invoice announces that the base is not the price being charged.

We would draw one further point from this. Because the amount is fixed by retail value rather than by cost, it does not scale down when a contractor buys more efficiently. It is, in effect, a charge on the catalogue value of everything that passes through their hands.

Why There Is No Input Tax Credit

The reason the overcharge is a cost rather than a timing difference. This section is our own analysis.

A registrant paying tax on an input generally recovers it as an input tax credit, so paying tax on an inflated base would be an annoyance rather than an expense.

The ACM removes that recovery by design, because it removes the registration. CRA's stated consequence is that ISCs do not have to register and, whether registered or not, do not account for the GST/HST on their sales of exclusive products[5].

A person who does not account for tax on their sales has no return against which to claim credits on their purchases.

So the tax charged on the suggested retail price is absorbed into the contractor's cost of goods, exactly as our arithmetic above treats it.

That is internally consistent rather than unfair, and this is worth saying plainly.

The tax that the contractor bears is the tax the eventual consumer would have paid on the retail sale. The contractor is not being taxed twice; they are pre-paying the consumer's tax and recovering it in the resale price, provided they sell at or near retail.

The problem arises entirely from discounting. A contractor who sells below the price the tax was computed on has absorbed part of a consumer's tax, and that is the mechanism the squeeze section quantifies.

What The ISC Gets In Return

The other side of the bargain, which is substantial.

CRA states that whether the tax is charged and accounted for at the approved direct seller's or the approved distributor's level, ISCs do not have to register and, whether registered or not, do not account for the GST/HST on their sales of exclusive products to other ISCs of the approved direct seller or to purchasers[5].

Three things that removes, and this is our own analysis.

No registration, so no business number, no filing obligation, and no returns to miss.

No collection, so a contractor selling at a party does not need to compute or charge tax on each item.

No remittance exposure, which in an industry of very small operators is the relief that matters most, since uncollected and unremitted tax is a liability that survives the closure of the business.

Set against the arithmetic above, the trade is genuinely two-sided.

A contractor selling at or close to suggested retail is materially better off under this method than under ordinary rules, because they bear the same tax the consumer would have paid and are relieved of the entire compliance apparatus.

A contractor who discounts heavily is worse off, and the more heavily they discount the worse it gets. Which of those describes a given participant is a commercial question, and it is one almost nobody in this industry has been prompted to ask.

The Small Supplier Calculation

A consequence with a trap in it for anyone who has other business income.

Commentary states that most ISCs do not have to register to collect GST/HST because they do not include revenues from their sales of products in their calculation to determine if they are small suppliers[4].

That is a specific and useful point, and this is our own elaboration of what it implies.

The small supplier test looks at a person's taxable supplies. Excluding direct selling revenues from that calculation means a contractor with substantial product sales can remain a small supplier.

But the exclusion is confined to those revenues. A person who also carries on other activities counts those other activities in the ordinary way.

Three situations where that matters.

A contractor who also does consulting, trades work or another side business must test that other activity on its own.

A contractor who sells products that are not the direct seller's exclusive products is outside the exclusion for those sales, since the rules address exclusive products.

And a contractor whose company turns out not to be approved loses the exclusion entirely, which is the subject of the next section.

The instruction is narrow but real: the exclusion is not a general exemption from registration. It removes one revenue stream from one test.

Your Position Depends On Someone Else's Application

The structural feature we think deserves the most attention. This section is our own analysis.

Assemble the pieces established above.

The method requires that the direct seller applied for and was granted approval[2].

Where it applies, the ISC need not register and does not account for tax on their sales[5], and excludes those revenues from the small supplier calculation[4].

Where it does not apply, none of that relief exists, and the ordinary rules govern a person who is buying goods and reselling them at a profit.

So an ISC's entire GST/HST position rests on a decision made by a company they do not control, evidenced by a document they have not seen, in an application they were not party to.

We are not aware of any public register a contractor could consult to verify it, and we did not find one.

Three practical consequences.

A contractor should ask the company in writing whether it holds approval, and keep the answer.

A contractor joining a newer or smaller company, or one operating in Canada through an arrangement designed elsewhere, should be more careful, since approval is a Canadian process that a foreign parent may not have completed.

And a contractor whose supplier is a distributor rather than the company itself has a second question to ask, because approval may or may not extend to that distributor.

Dealing With A Non-Approved Distributor

A case CRA addresses expressly, which confirms the concern above is real rather than theoretical.

CRA states that its info sheet GI-126 discusses how the ACM applies to ISCs, including distributors that have not been granted approval to use the ACM[5], and in that info sheet notes that the term ISC includes a non-approved distributor[5].

We did not extract CRA's full treatment of that case and do not state it.

What the existence of the category tells us is the point worth making, and it is ours.

Approval is not network-wide by default. A single direct selling organisation can contain approved and non-approved distributors simultaneously, which is precisely why the application may be made jointly with one or more distributors[5].

So the relevant question for a contractor is not only whether the brand at the top of the chain has approval, but whether the entity that actually invoices them is covered.

In a multi-level structure those may be different entities, and a contractor buying from an upline distributor rather than from the company is in exactly the position CRA found it necessary to write about.

Anyone in that position should read GI-126 itself rather than this summary of it.

The Network Sellers Method

The other method, described from the sources that mention it rather than from its own info sheet.

CRA describes the NSM as available to businesses in the direct selling industry that sell their products to consumers through sales representatives who receive commissions for arranging for the sales of the products, and directs readers to Info Sheet GI-052 for the rules[1].

Commentary states that the network sellers rules can be used upon approval by CRA, and that when they are in use, any commissions or bonuses paid to sales representatives would not be subject to GST/HST, and would not be included in a calculation to determine if the sales representatives are small suppliers[4].

We flag that we did not obtain GI-052 and that our account is second-hand.

The structural parallel is worth drawing out, and it is ours.

Both methods take the same approach: identify the participant who cannot practically be brought into the system, remove them from it, and collect the tax at the level of the registered company.

Under the ACM the removed transaction is the ISC's resale of goods. Under the NSM it is the representative's supply of a service, being the arranging of sales for a commission.

The two methods therefore relieve different supplies, which is another reason a participant needs to know which category they fall into before assuming a relief applies to them.

A Business Can Qualify For Both

A point that complicates the picture inside a single organisation.

CRA states that depending on their business structure, businesses may qualify to use one or both methods[1], and commentary states that the network seller rules can be used even if the seller is an approved direct seller for the purposes of the ACM[4].

Three consequences, ours.

A single company may have two populations, some buying and reselling as ISCs, others arranging sales for commission as representatives.

An individual may move between those populations as their arrangement with the company changes, or occupy both at once by buying product for resale while also earning commissions on downline sales.

And the treatment of the commission or bonus element is governed by the network seller rules where those apply, which is a different question from the treatment of product purchases under the ACM.

A participant earning both product margin and downline commissions therefore has two questions, not one, and they may be answered by two different methods held by the same company.

Where The Tax Is Reported

A mechanical detail that matters on the company side.

CRA states that the approved direct seller includes the amount of tax in its net tax calculation by including the amount on line 103 of its GST/HST return for the reporting period that includes the earlier of the day the amount payable by the ISC becomes due or is paid[5].

Two observations, ours.

The timing rule is the ordinary earlier-of test, which means the company accounts for tax on the retail value when the ISC's obligation arises, not when the product ultimately reaches a consumer.

And it confirms that the amount is collected tax rather than a separate levy, since it goes into the ordinary net tax calculation.

For a direct selling business, the practical significance is that the liability is driven by catalogue values on orders placed, not by cash received or by discounts granted. A company that discounts aggressively to build its network is accruing tax at undiscounted values throughout.

That is a cash flow characteristic worth modelling rather than discovering, and it belongs in the same conversation as any promotional pricing decision.

What The Auditor Actually Examines

The enquiry in practice. This section is our own analysis.

Whether approval exists, and its date and scope, including which distributors it covers.

The tax base used, tested against published catalogue prices in force at the time, including any shipping and handling component.

Whether the lowest published price was used, where promotional pricing was in effect.

The characterisation of participants, and whether people treated as ISCs are actually buying and reselling rather than earning commissions.

Timing, against the earlier of the day the amount becomes due or is paid.

Non-exclusive products, since the relief addresses exclusive products and anything else sold through the same network sits outside it.

On the contractor side, other business activities, since the small supplier exclusion covers only the direct selling revenues.

The fourth item is where we would expect the most difficulty. A company that has approval for the ACM but whose network in practice operates on a commission basis has participants whose supplies may not be relieved by the approval it holds.

What Records Survive

The approval itself, with its date and the entities it covers.

Written confirmation from the company that approval is in force, obtained by the contractor and dated.

Catalogues or published price lists for each period, since the tax base is the published price at the time.

Supplier invoices showing the price charged and the tax charged separately, which is what allows the base to be tested.

The agreement with the company, which evidences whether the participant buys and resells or arranges for commission.

Records of any non-exclusive products sold through the same activity.

Records of any other business activity, for the small supplier test.

What To Do

Establish which method applies before anything else. Whether you buy and resell or arrange sales for a commission decides which set of rules governs you.

Ask the company in writing whether it holds approval. The entire relief depends on it, and it is not something a contractor can verify independently.

Ask separately about your actual supplier. Approval may be joint with distributors, and CRA writes expressly about distributors that are not approved.

Price off your all-in cost, not your purchase price. On our figures a 25 percent discount leaves about 12 points of usable room once the tax on retail value is included.

Check the base includes shipping and handling. CRA's definition says it does, which explains invoice differences that otherwise look like errors.

Use the lowest published price. The definition refers to the lowest price published for sale to purchasers, which matters during promotions.

Do not treat the small supplier exclusion as general. It removes direct selling revenues from the calculation and nothing else.

Separate non-exclusive products. The relief addresses the direct seller's exclusive products, so anything else you sell needs its own analysis.

Keep the catalogues. The base is a published price at a point in time, and it cannot be reconstructed later.

Read GI-125 and GI-126 rather than this article. They are short, they are CRA's own, and the second one addresses the non-approved distributor case directly.

The Limits Of This Analysis

Several caveats matter. This is not tax advice; whether these rules apply depends on the structure of the arrangement and on whether approval has been granted. Everything is stated as verified in August 2026 and requires confirmation. The two CRA info sheets relied on are dated April 2012 and may have been superseded; we did not establish whether more recent guidance exists, and CRA's own memorandum carries a disclaimer that its information does not replace the law in the Excise Tax Act and its Regulations. We did not read the statutory provisions governing either method. We did not obtain Info Sheet GI-052, and our account of the Network Sellers Method comes from sources that mention it rather than from the guidance itself. We did not extract CRA's full treatment of non-approved distributors and state only that the category exists and is addressed in GI-126. We could not establish whether any public means exists for a contractor to verify that approval is in force, and say so rather than assuming none exists. All arithmetic is our own, uses an assumed 13 percent rate and assumed discount tiers on a hypothetical product, and is illustrative only; rates differ across provinces and a different rate materially changes the figures. The characterisation markers distinguishing contractors from representatives, the resale squeeze analysis, the dependency argument and the audit examination structure are our own. This article does not address income tax treatment of direct selling income, inventory valuation, the treatment of samples and demonstration stock, personal use of purchased product, provincial sales taxes outside the HST, or importation where product is shipped from outside Canada.

Related Reading

Sales Tax Arranging For, Or Merely Assisting Another GST/HST question that turns on whether a person supplies goods or supplies a service. Sales Tax Nurses Or Nursing Where the characterisation of what is being supplied decides the whole liability. Payroll Contractor Or Employee The parallel question for people whose working relationship is described one way and operates another.

Frequently Asked Questions

Why am I charged tax on the catalogue price when I paid less?

Because that is what the Alternate Collection Method requires. CRA's info sheet states that an approved direct seller charges the contractor tax on the suggested retail price even if it charges a lower price to the contractor. The design collects, at the company level, the tax the eventual consumer would have paid on a retail sale.

Do I need to register for GST/HST?

Generally not, where the method applies. CRA states that contractors do not have to register and, whether registered or not, do not account for tax on their sales of exclusive products. That relief depends entirely on the direct seller having been granted approval, which is worth confirming in writing.

How much of my discount does this actually consume?

On our figures, roughly half. A 25 percent discount on a $100 item at 13 percent leaves an all-in cost of $88.00, so the break-even resale price sits about 12 percent below suggested retail rather than 25. Price off all-in cost rather than off what you paid the company.

Can I claim the tax back as an input tax credit?

Not while unregistered, and the method is what removes the registration. Since a contractor does not account for tax on their sales, there is no return against which to claim credits, so the tax becomes part of the cost of goods. That is coherent as long as you sell at or near retail; it bites when you discount.

Does this exclusion mean I never have to register for anything?

No. Commentary describes the exclusion as removing direct selling product revenues from the small supplier calculation. Other business activities, and sales of products that are not the direct seller's exclusive products, are tested in the ordinary way.

What if I buy from an upline distributor rather than the company?

Then you have a second question, because approval may be granted to the direct seller alone or jointly with one or more distributors. CRA writes specifically about distributors that have not been granted approval, which tells you the category exists. Anyone in that position should read GI-126 directly.

References

1. Canada Revenue Agency. GST/HST Info Sheet GI-125, Direct Selling Industry: The Alternate Collection Method for Approved Direct Sellers and Approved Distributors, April 2012, on businesses in the direct selling industry generally selling their products either directly to consumers through commission-based sales representatives or to independent sales contractors who in turn sell to other ISCs of the direct seller or to purchasers; on two methods being available to simplify the operation of the GST/HST, the Network Sellers Method and the Alternate Collection Method, with businesses potentially qualifying to use one or both depending on their business structure; on the NSM being available to businesses that sell their products to consumers through sales representatives who receive commissions for arranging for the sales, with those rules explained in Info Sheet GI-052; and on the ACM being available to businesses that sell their products to distributors or ISCs who in turn sell to other ISCs or to purchasers. Note: a CRA publication dated April 2012 which may have been superseded. canada.ca
2. Canada Revenue Agency. GST/HST Info Sheet GI-126, Direct Selling Industry: The Alternate Collection Method for Independent Sales Contractors, April 2012, on persons involved in selling products of a direct selling business being sales representatives or ISCs for GST/HST purposes; on suggested retail price meaning the lowest price before tax published by a direct seller for sale to purchasers, usually the price set out in a direct seller's catalogue of products, including any amount set out for shipping and handling; on taxable meaning subject to the 5 percent GST or to the HST rate in effect in a participating province; on the direct seller being required to apply to CRA, either alone or jointly with one or more of its distributors, and to have been granted approval before the ACM can be used; and on the approved direct seller or approved distributor charging the ISC the GST/HST on the suggested retail price of exclusive products even if the ISC pays a lower amount. Note: a CRA publication dated April 2012 which may have been superseded. canada.ca
3. Canada Revenue Agency. GST/HST Memorandum 14.1, Direct Sellers, describing the alternate collection method for direct sellers who distribute their exclusive products to purchasers through independent sales contractors rather than through retail establishments, and carrying a disclaimer that the information in the memorandum does not replace the law found in the Excise Tax Act and its Regulations and is provided for reference. Note: a CRA memorandum; we relied on its overview and disclaimer and did not work through its detailed paragraphs. canada.ca
4. TaxTips.ca. Direct Sellers and the Alternative Collection Method for Collecting GST or HST, on direct sellers being able to apply to CRA to use the ACM, a simplified method for collecting GST or HST; on direct sellers being organisations that sell their exclusive products to distributors or independent sales contractors who solicit orders and sell the products to consumers, with examples given; on direct sellers charging and accounting for the tax on the suggested retail price of the products as if they had made the sales directly to consumers; on most ISCs not having to register because they do not include revenues from their sales of products in their calculation to determine whether they are small suppliers; on the direct seller accounting for the tax on the suggested retail price when it makes the supply to the ISC; and on network seller rules being usable upon CRA approval, under which commissions or bonuses paid to sales representatives would not be subject to GST/HST and would not be included in the small supplier calculation, and which can be used even where the seller is an approved direct seller for ACM purposes. Note: a Canadian tax information website, used for the small supplier and network seller points. taxtips.ca
5. Canada Revenue Agency. GST/HST Info Sheet GI-125, cited separately for its statements that the application for approval may be made solely by the direct seller or jointly with one or more of its distributors, with all parties involved able to use the method upon receiving approval; that GI-126 discusses how the ACM applies to ISCs including distributors that have not been granted approval, and that in that part of the info sheet ISC includes a non-approved distributor; that when approval is granted the approved direct seller charges the ISC the GST/HST on the suggested retail price of the exclusive product sold to the ISC even if it charges a lower price; that the approved direct seller includes the amount of tax in its net tax calculation on line 103 of its GST/HST return for the reporting period that includes the earlier of the day the amount payable by the ISC becomes due or is paid; and that whether tax is charged and accounted for at the approved direct seller's or approved distributor's level, ISCs do not have to register and, whether registered or not, do not account for GST/HST on their sales of exclusive products to other ISCs of the approved direct seller or to purchasers. Note: as above; we did not extract CRA's full treatment of non-approved distributors. canada.ca
6. Ryan. (2012, April). CRA GST/HST Info Sheets re: The Alternate Collection Method for the Direct Selling Industry, on GI-125 including a discussion of how direct sellers and distributors may apply for approval from CRA to use the method, with the application made solely by the direct seller or jointly with one or more distributors and all parties able to use the method upon approval; on GI-126 discussing how the ACM applies to ISCs including distributors not granted approval; and on an approved direct seller or distributor generally charging GST/HST on the sale of exclusive products to ISCs based on the retail value of those products even where it is greater than the actual selling price to the ISC. Note: a tax advisory firm's summary published at the time the info sheets were released. ryan.com

This article is provided for general informational purposes and is not tax advice. The CRA info sheets relied on are dated April 2012 and may have been superseded; CRA's own memorandum states that its information does not replace the law found in the Excise Tax Act and its Regulations. Info Sheet GI-052 on the Network Sellers Method was not obtained. All arithmetic is the authors' own, assumes a 13 percent rate and hypothetical discount tiers, and is illustrative only.