GST/HST/PST and INCOME TAX for eBay Sellers

If you sell your own used personal items on eBay (and elsewhere) this thread is not for you. Sales of used personal items are generally not taxable.

 

Here is a quick summary of taxation rules in Canada as they apply to sellers who purchase goods for resale. It does not really matter if you sell online or through a brick and mortar store or both. Since you are in fact running a business (buying and reselling for the purpose of making a profit) your activities are subject to taxation.

 

Unless you have strong bookkeeping skills and knowledge of taxation laws, I strongly recommend you hire a competent accountant familiar with your personal circumstances – preferably one with experience in mail order business - to assist you in setting up your books properly and arrange registration with the tax authorities if required.

 

GST/HST/PST

 

If your annual worldwide business revenues (including shipping charges) exceed Cdn$30,000, you must, by law, register with GST/HST. For the purpose of registration, it does not matter if most of your sales are shipped outside Canada.

 

Start learning about it here: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/menu-eng.html

 

After you have read the information in that link, please read again. It is important to understand the concept and its applications.

 

Once registered with GST/HST, you must remit the tax (GST or HST) based on the province of residence of the buyer, regardless of where you are located in Canada. For example, if you ship to a buyer in Ontario, you will have to remit 13% HST of the transaction value. If your buyer is located in Alberta or Manitoba (for example), you need to remit 5% GST since Alberta and Manitoba are not HST provinces.

 

Whether you actually charge the GST/HST or absorb it is up to you. Many GST/HST registered online sellers absorb the tax to remain competitive with the majority of sellers who are not GST/HST registered. In any case, the tax must be remitted. To be candid, that is all the government cares about: getting the tax from you. They do not care if you collect it or not!

 

If you decide to charge GST/HST to your Canadian eBay buyers, in fairness, I strongly suggest you clearly state that fact in your listings. Most Canadian buyers expect their purchases from Canadian sellers on eBay to be tax free and some will even post negative feedback when charged tax unexpectedly.

 

While you are obligated to remit GST/HST payable, you also get the benefit of receiving Input Tax Credits (ITCs) on the tax you have paid at time of purchasing your inventory or when paying for the many services and expenses related to your business. ITCs are credited to you regardless where the goods are eventually shipped.

 

NO GST/HST should be charged or needs to be remitted for goods exported from Canada.

 

As far as PST is concerned, provinces that are not HST provinces have different rules and you should consult the tax authorities of your province (BC, SK, MB, QC) to understand your liabilities and responsibilities.

 

INCOME TAX

 

That is pretty simple. All Canadians are required to report their net business income (profit) and add it to other income (employment, pension, investment, etc…) to eventually arrive to taxable income.

 

There is no minimum, no exception, no exemption. All net profit must be reported starting from the first dollar.

 

To calculate your net profit, add up your revenues (sales, handling and shipping charges) for worldwide proceeds and deduct your cost of goods sold and business related expenses.

 

All amounts must be calculated in Canadian dollars. If you purchase and resell in a foreign currency (US$ or others) you need to convert those amounts to Canadian dollars prior to presentation on your Profit and Loss Statement.

 

If you are GST/HST registered, the tax charged or paid should not be included in your numbers, if you are not GST/HST registered, then the tax paid should be included in your purchases and expenses.

 

Only the net profit is added to your other income on your tax return (line 135).

 

For the benefit of online sellers, I prepared this sample Profit and Loss Statement a few years ago, Feel free to use it and/or modify it to your specific needs:

http://www.pierrelebel.com/lists/P&L-sample.htm

 

CRA provides similar forms for your convenience:

http://www.cra-arc.gc.ca/E/pbg/tf/t2125/README.html

 

If you have any questions on the subject, please post them here, on this thread.

 

Message 1 of 130
latest reply
129 REPLIES 129

GST/HST/PST and INCOME TAX for eBay Sellers

I didn't see that message oops. I saw somewhere that it was 5 or 6 percent. How could it be 25%?
Message 81 of 130
latest reply

GST/HST/PST and INCOME TAX for eBay Sellers

valuable deals - please see the other thread you started for a comprehensive reply to your question.

 

Income tax is paid at the rate determined based on your total worldwide income including the net profit you made from your online (eBay) business.

Message 82 of 130
latest reply

GST/HST/PST and INCOME TAX for eBay Sellers

moy64
Community Member

Will it be possible to be refunded the  5% GST (BC) that I must pay on sales to International buyers when selling on eBay, effective July1st.?

sorry......long sentence...:))

 

When the new policies go into effect with eBay at the beginning of July the GST will be automatically charged to me.

 

Also, will Canadian eBay sellers be provided with an annual statement for the year's total or will this b/k be the responsibility of the seller.

 

thank you

Message 83 of 130
latest reply

GST/HST/PST and INCOME TAX for eBay Sellers

Sellers who are GST/HST registered get the tax back through ITCs,

 

Sellers who are not registered with GST/HST pay the tax and cannot claim it back.  The amount paid becomes part of their cost of goods.

Message 84 of 130
latest reply

GST/HST/PST and INCOME TAX for eBay Sellers

I just received the information that Canadian sellers will start dealing with eBay Canada Limited from July 1st. Will selling used items on eBay Canada be taxable with GST/HST/QST ?
Message 85 of 130
latest reply

GST/HST/PST and INCOME TAX for eBay Sellers

One more time:

 

The only change announced by eBay is the fees payable to eBay, the fees only, will now be charged GST or HST by the Canadian government - paid through eBay on the monthly invoice and remitted by eBay to the government.

 

The change has absolutely nothing to do with the taxable nature of the products offered and sold.  Only the fees are being taxed by the government.

Message 86 of 130
latest reply

GST/HST/PST and INCOME TAX for eBay Sellers

Thank you, Pierre.

 

 

Message 87 of 130
latest reply

GST/HST/PST and INCOME TAX for eBay Sellers

Thank you so much to make it clear! I was confused if not scared 🙂 by official letter.

Message 88 of 130
latest reply

GST/HST/PST and INCOME TAX for eBay Sellers

I have gone through an entire post and i did not understand the following:

I buy and sell on ebay.com (on ebay.ca I prefer not to sell) may be 30-90$ per month or even per 3 months..for my personal colection of coins banknotes..

 

when I SELL -doI have to charge GST/PST on all items?

 

when I buy will I BE CHARGED taxes too?

 

I do not understand,i apologize

Message 89 of 130
latest reply

GST/HST/PST and INCOME TAX for eBay Sellers

"when I SELL -do I have to charge GST/PST on all items?

 

If you are not registered with GST/HST the answer is NO  (it does not matter if you list on eBay.com, eBay.ca, eBay.,uk, or any other eBay site around the world. Keep in mind that income tax is a totally different question and net income must be reported on your income tax return (line 135) for items purchased and resold at a profit.

 

"when I buy will I BE CHARGED taxes too? "

 

It depends what you buy and where and from whom.

 

If you buy from outside Canada (on eBay or elsewhere), the determination to collect tax (GST or HST) from you is made by the Canada Customs agent at the time of Customs clearance.  In such instances the tax may be collected by Canada Post (or other couriers) at time of delivery.

 

If you buy from a retail store (registered to collect taxes) you pay tax to the store who remits it to the government

 

If you buy from a Canadian seller on eBay, there are three possibilities:

 

1) the seller is not registered to collect GST/HST so no tax is payable (this is the case with most small individual Canadian sellers)

 

2) the seller is registered to collect GST/HST, the tax will be collected by the seller and remitted to the government

 

3) the seller is registered with GST/HST but, for marketing reasons, decides to absorb the tax. Then no tax will be charged to you.

Message 90 of 130
latest reply

GST/HST/PST and INCOME TAX for eBay Sellers

Hello Friends,

 

I just received an email this morning regarding the implementation of sales tax for Canadian buyer/sellers. Now, I am a Canadian part-time seller, my yearly sale is less than $5000 and 95% of my buyers are International. So what should I do in this case? Do I need to get a HST/GST number for sales Tax or will I be charged Sales Tax through my monthly invoice? Please help.

Message 91 of 130
latest reply

GST/HST/PST and INCOME TAX for eBay Sellers

"So what should I do in this case?"

 

Nothing is most likely the best answer.

 

With only $5,000 in annual sales, there is most likely no real advantage in registering with GST/HST

 

In $5,000 worth of sales, you pay about $500 a year in eBay fees. Since you are in Ontario, the government will charge you 13% HST on your eBay fees or about $65 a year (less than $6 month).

 

Nobody likes to pay taxes but... not much anyone can do about it in this case.

 

The tax will be calculated by eBay, automatically added to your monthly invoice and remitted by eBay to the federal government.  There is no extra paperwork for you.

Message 92 of 130
latest reply

GST/HST/PST and INCOME TAX for eBay Sellers


@fanshop2016 wrote:

Hello Friends,

 

I just received an email this morning regarding the implementation of sales tax for Canadian buyer/sellers. Now, I am a Canadian part-time seller, my yearly sale is less than $5000 and 95% of my buyers are International. So what should I do in this case? Do I need to get a HST/GST number for sales Tax or will I be charged Sales Tax through my monthly invoice? Please help.


This is not about sales tax that you or eBay will be charging buyers.  As Pierre mentioned eBay will add gst/hst on to the invoice that you receive from them each month for your seller fees.

Message 93 of 130
latest reply

GST/HST/PST and INCOME TAX for eBay Sellers

 

What happens in the situation of partial refunds, returns, or refunds without returns? Will Ebay refund the GST/HST?

Message 94 of 130
latest reply

GST/HST/PST and INCOME TAX for eBay Sellers

What about GST/HST on shipping costs refunded as Ebay refuses to refund the actual shipping cost itself?

Message 95 of 130
latest reply

GST/HST/PST and INCOME TAX for eBay Sellers

"Will Ebay refund the GST/HST?"

 

The government charges tax (GST or HST) on the fees charged by eBay.

 

If some of the fees are refunded, then that portion of the fees will not be charged tax.

 

For example, fees during the month $50.00, fees refunded ($1.00), net fees charged $49.00 - tax will be calculated on $49.00

Message 96 of 130
latest reply

GST/HST/PST and INCOME TAX for eBay Sellers

Hi Pierre

 

I am asking about the fees that they don't refund or that go from one billing period to the next

Message 97 of 130
latest reply

GST/HST/PST and INCOME TAX for eBay Sellers

Apparently eBay will credit fvf on partial refunds if you phone them. I haven't ever tried because the amounts are usually quite small but I know people who have been credited. Obviously if ebay doesn't charge you fees on those amounts than you wouldn't pay gst on them. 

 

I would imagine that any type of refund that is done directly through ebay resulting in lower fees would also have lower fvf. So if you did a partial refund through the return process and your fees changed, the gst/hst would change as well.   But if you did that partial through Paypal, that wouldn't affect your fees so probably wouldn't affect the amount of tax charged either.

Message 98 of 130
latest reply

GST/HST/PST and INCOME TAX for eBay Sellers

Buyer buys 10 items and pays shipping 10 times (because Ebay wants payment now). Ebay does not refund that so if you do, you eat the FVF's on shipping and now the tax as well!

 

If I am correct, and there is an INAD and you fight and lose, Ebay does not refund any fees. (correct me on this one if I am wrong) Then you will eat the tax as well.

Message 99 of 130
latest reply

GST/HST/PST and INCOME TAX for eBay Sellers

It is simple.

 

If eBay refunds the fees, the tax will be calculated on the net amount of the fees charged during that billing period.

 

If eBay does not refund the fees, then the tax is calculated on the fees charged.

 

If a fee credit applies to a future period (following month) then, once again, the tax will be calculated on the net amount of fees charged during that period.

Message 100 of 130
latest reply