"when and by whom the CRA gets wind of a seller's earnings?"
Now, nobody reports earnings. They may report sales or receipts information.
Canada works on a self-reporting system. CRA gets information from eBay and PayPal and many other sources such as Canada Post, banks, packing supplies suppliers, etc...
CRA estimates earnings based on the limited information they have when the taxpayer does not produce any.
The court case lost by eBay several years ago included PowerSellers at the time. I understand reporting has been expanded and eBay is now cooperating with CRA instead of fighting the Canadian government (that was a nice PR exercise).
Anyone who has had access to the audit department at CRA understands the huge amount of information coming into the system. Obviously CRA does not want taxpayers to "cheat" and, as such, does not tell the world all its secrets how they estimate anyone's gross income. I suspect much of it has to do with spending habits (for example, if one purchases a $80,000 car - CRA knows from the HST report from the car dealer. A quick look will tell them if the income reported by the buyer justified such purchase. If not, information is sent to the audit department and we all know the rest of the story. The same is true with interest and investment income.
for example, if one purchases a $80,000 car - CRA knows from the HST report from the car dealer
That would be impossible NOBODY reports GST by individual line item or who the tax was collected from.
CRA could ask the Ministry of Transport in the province of the taxpayers residence for a history of vehicles registered to that person but they would first need a reason to ask such as following an audit where the numbers reported by the taxpayer don't make sense.
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