Taxes in Canada with on-line betting

On-line sports betting is very popular these days. You cannot watch a game or highlights without seeing a banner for some of the major sports betting websites.

I have always wondered about whether taxes were applicable to any sports bets placed on-line in Canada.

The answer is that it depends!

Business or Personal

An individual’s gambling activities may result in taxable business income or a business loss. This will be the case if the gambling activities constitute a source of income (that is, carrying on the business of gambling). Determining the commerciality of gambling can be challenging.

Games of pure chance, like lotteries, lack the badges of trade to which the traditional tests of business activity can be applied. Traditional tests to determine the existence of a business include an evaluation of a taxpayer’s profit-making purpose (that is, pursuit of profit) and the commerciality of a taxpayer’s activity. However, gambling is always undertaken in pursuit of profit.

Criteria for Taxes

It is interesting understanding the criteria for their decision:

The issue of whether a taxpayer’s activities are such that he or she can be considered to be carrying on a gambling business is a question of fact that can be determined only by an examination of all of the circumstances and the taxpayer’s entire course of conduct. Although no single factor may be conclusive, the following criteria should be considered in making the determination:

  • the degree of organization that is present in the pursuit of this activity by the taxpayer,
  • the existence of special knowledge or inside information that enables the taxpayer to reduce the element of chance,
  • the taxpayer’s intention to gamble for pleasure as compared with any intention to gamble for profit as a means of gaining a livelihood, and
  • the extent of the taxpayer’s gambling activities, including the number and frequency of bets.

I find it interesting on how someone can be perceived as having a a gambling business when there is no product bought or sold, if it is a business it is very subjective. Canadians are allowed to bet now on their favourite sports and matches so I am not sure how the criteria applies to sports gambling versus regular card games. The frequency would be completely different and the level of organization would be higher in some cases as consumers have access to so much data that they could come up with a model.