Executive Summary: Key Legal and Evidentiary Issues

• Court evaluated whether the unnamed persons requirement (UPR) identified an “ascertainable” group under subsection 231.2(3)(a) of the Income Tax Act.

• Inconsistencies in the Minister’s definitions of “Merchant” and “Shopify Owner” created legal ambiguity and procedural uncertainty.

• Shopify demonstrated that it could not reliably identify or extract data based on the broad and shifting criteria outlined in the draft UPR.

• Evidence from the Minister lacked specificity and personal knowledge, including overreliance on boilerplate and hearsay.

• The proposed UPR’s scope was overly expansive and unworkable, risking breach of Shopify’s contractual and privacy obligations.

• The Federal Court denied the application and awarded costs to Shopify, with the amount to be determined separately.

Facts and outcome of the case

Background and legal framework

In this case, the Minister of National Revenue applied to the Federal Court for authorization to issue an Unnamed Persons Requirement (UPR) to Shopify Inc. under subsection 231.2(3) of the Income Tax Act (ITA) and the equivalent provisions of the Excise Tax Act (ETA). A UPR allows the Canada Revenue Agency (CRA) to obtain information from third parties about individuals not specifically named in a tax enforcement action, provided the group is “ascertainable” and the request aims to verify tax compliance.

The CRA targeted “Canadian-resident Merchants” using Shopify’s platform who may not be complying with tax obligations. The proposed UPR sought extensive information on all accounts associated with Canadian addresses that had sold or leased products or services through Shopify, including personal and business identifiers, transaction volumes, and financial details.

Shopify’s opposition

Shopify opposed the application, arguing the target group was not properly defined. The terms “Merchant,” “Shopify Owner,” and other identifiers used by the CRA were either vague, overlapping, or inconsistent with Shopify’s systems and definitions. Shopify also highlighted that information sought for some users simply did not exist unless financial services like Shopify Payments were used. The company further claimed that the CRA’s supporting affidavit was based on assumptions and boilerplate language without adequate factual grounding or personal knowledge.

Court’s analysis on ascertainability

The Court undertook a detailed statutory interpretation of “ascertainable” under subsection 231.2(3)(a) and concluded that while the term “Merchant” was known and usable by Shopify, the introduction of the undefined and broader term “Shopify Owner” undermined the clarity of the request. The inconsistency between targeting addresses “when registering” versus “associated with” accounts further complicated compliance. This rendered the target group not ascertainable in law, a threshold requirement for a valid UPR.

Outcome and costs

Justice Régimbald denied the Minister’s application on the grounds that the precondition of ascertainability was not met. While the Court found the term “Merchant” could form the basis of a valid UPR in future, the current draft request was too unclear and inconsistent to authorize. Shopify was awarded legal costs as the successful party, with the specific amount to be determined following a submission of its bill of costs within 30 days.

The decision emphasizes the need for precision and internal consistency in UPR applications, especially when dealing with large digital platforms and privacy-sensitive information. It also signals the importance of collaboration between tax authorities and digital service providers to design administratively feasible and legally sound requests.