Group Case for Discussion: Wish

About Wish Levine's business

Group Case for Discussion:  Wish

Wish Levine was furious with the government.  They were picking on her, trying to put her out of business; and all over a few little regulations, most of which she hadn’t even known about.

Four years ago, Wish started a business going into people’s homes and making video recordings of customers’ possessions.  She would provide the customers with a copy of the recording as well as an itemized inventory and she would keep a copy of each in safe storage. The idea was that if any customer had an insurance claim for loss of items through theft, fire or flood, Wish would be able to provide the insurance company with the details and proof of the loss. Wish had a lawyer set the business up as a corporation so that it would sound more professional (Levine Asset Records Inc.)

Business was good right from the beginning and within a couple of months Wish had to hire two other videographers, just to keep up with the business. A friend advised her that instead of hiring the videographers as employees, she could treat them as subcontractors and avoid a lot of government paper work. Her new helpers agreed that they would use Wish’s equipment, but their own vehicles, and she would pay them a flat rate of $70 for each video job that they did. The videographers would cover their own transportation costs and file their own tax returns.

The business grew so quickly, that she was working night and day to deal with customers, produce the inventory lists, schedule appointments and still do some of the video work herself. Her helpers seemed to enjoy their jobs, they never complained. And Wish had lots of money pouring into her bank account, but she was just too busy to spend any of it except for her basic living costs.  She knew that she had not been keeping up with her accounting and she was getting weekly reminders about tax returns and corporate returns unfiled. (Wish wasn’t sure whether those were the same thing or different things.) But she felt that as long as she was saving most of what went into her bank, then she still had more than enough to pay whatever she owed the government.

When she finally went to see an accountant, she was told that Canada Revenue Agency would not be able to process her tax returns because Industry Canada had dissolved her corporation for failure to send in her corporate returns. (Now Wish understood they were different things.) There was, however, a process to get the corporation reinstated but it would take some time and a lot of paper work for Wish to complete. In the meantime, Canada Revenue Agency was threatening legal action over unpaid taxes.

At the same time, another branch of CRA called Wish regarding the fact that she had failed to collect HST from her customers. Wish explained that she was under the impression that only retail stores had to collect this. “Wrong,” she was told, and further informed that Wish was responsible to pay 13% of all the revenue she had made in the form of HST, immediately. When she called the accountant for help, she was told that HST filings could not be processed because the corporation had been dissolved.

The same week, the provincial Labour Board sent a summons for Wish to appear.  She was accused of paying one of the videographers less than minimum wage (after time spent on the job and transportation costs were figured in.) And it turned out that the other videographer had not been paying his taxes. So, yet a third branch of Canada Revenue Agency was holding Wish responsible for this. It was explained to her that despite any contract she may have had, the videographers were in fact employees for whom she should have been deducting income tax, CPP contributions and EI contributions, all of which Wish would now have to pay, along with possible fines.

1. What sort of regulations come under Provincial jurisdiction? Federal? Identify the websites (give URLs) where you can find details on the business regulations in your own province.