CRA and Powersellers

[fenian]

Like a lot of you, I just received the email confirming that CRA has the final go-ahead (as of Nov 7) to obtain 2004/05 sales records. As part of the message, I note they will seeking court orders to access records for all subsequent years as well. Could be interesting times for some folks out there.

[duujogl]

Michael, I hope all of us here are smart enough (and honest enough) to have been reporting our income all along, and also to have been collecting (and remitting) GST and PST where applicable. If not, you're right, "interesting times" may be an understatement!!

[motivation_store]

If some of you are worried, let's clear up a few things:

1- CRA will most likely investigate the very high powersellers first and foremost. The ones makes over $10,000 a month. It will not be feasible for the CRA to send out auditors paid at $80,000 a year to collect $100 here and there worth of taxes. They investigate the big fishes, where they can collect much more money.

2- Ebay sales are NOT revenue! When you get paid that is revenue. What if someone pulls a prank on me and buys 1000 items, but never pays them? Am I supposed to pay taxes on this? Of course not, I never got paid! So even if let's say my ebay sales are $1000 a month, maybe I only got paid $200. Any decent lawyer can argue this.

People, stop freaking out about this. CRA will not slap you with taxes to pay based on ebay information alone. They need to audit you to figure out exactly whats going on. REMEMBER, they will not audit people for scraps. They will go after the big businesses. Plus, this can take years. Just keep all records and get yourself a good accountant.

[pierrelebel]

"CRA will most likely investigate the very high powersellers first "

Please allow me to disagree.

The first thing CRA will do is match the names from eBay to its own tax records to confirm business income has been reported by all eBay sellers. The first priority will be to investigate those who have not declared business income in 2004 and/or 2005.

It does not necessarily mean those sellers were crooks or tax evaders. There may be valid reasons why sales and profits were not reported and CRA will want to know what those reasons are.

Next, they will compare eBay sales to gross business revenue reported by sellers on their tax return looking for major percentage discrepencies. For example, if eBay shows sales of $50,000 and a taxpayer reported sales of $20,000, odds are good an audit will be called for.

By the way, most CRA auditors do not make $80,000 a year. That is a salary level for highly experienced senior tax auditors.

"So even if let's say my ebay sales are $1000 a month, maybe I only got paid $200. Any decent lawyer can argue this." ...and lose the case unless the argument is supported by evidence.

In an audit, Revenue Canada will check exactly how much was received through PayPal, bank accounts, etc... To claim 80% of sales have not been collected on an annual basis is ludicrous and goes against the eBay overall experience.

"they will not audit people for scraps. They will go after the big businesses." That is also incorrect as CRA has no way of knowing how big the tax liability is until investigated.

I agree there is no need to freak out or be paranoid about a tax audit. Been there, done that a few times... it is not the end of the world. Yes it is frustrating and aggravating but... life does go on. .

[tesgartor]

what if I do not have receipts for all the crap I sold. Problem is if I sold 2-3 laptops in the month and I reached 1000 a month and my margin was maybe 100 on each, how to prove it :-)???

[motivation_store]

Good point cilsel:

you could have sold just a few items and been over $1000...without it being a "business". They cant prove how much profit you made. It's like trying to pinpoint how much someone makes from a classified ad to sell their junk. You can't.

Also, I used to sell electronics on ebay and trust me I had ALOT of non paying bidders. You can't say 80% dont pay but 30-40% was the norm in that business.

Another example, I once had an ebay business with a few colleagues. How do you split that into multiple people? This is why Ebay is NOT an income. CRA will use it as a guideline, but ebay numbers are not the end of the story.

I have friends in the govt and in the tax industry. Trust me, they go after the big guns. Its not profitable for them to audit someone that made $1000 on ebay.

If you didnt declare anything, then it looks bad. But if you declared a business revenue, and it seems to match that of ebay, you will not be high on their list. If there is a $30,000 discrepancy for example, yeah I agree, that would be a red flag.

Look, nobody knows what they will do, if anything at all. Also, you can very easily put a fake address and name on ebay. So what if someone sold a bunch of stuff under my name? There will be alot of bad stuff like that to sort through. It can take years. Bottom line, take this as a signal to keep your records and play by the rules. You'll sleep better at night!

[pierrelebel]

"take this as a signal to keep your records and play by the rules."

We all agree. :-) .

[tesgartor]

🙂

[fatdane]

Whiole I agree with with CRA only going after the big fish for INCOME TAx, they may well start asking all vendors if they are registered for and collecting GST/HST which would be collected on gross sales - and it doesn't take long for a GST audit.

[motivation_store]

Under $30,000 gross, they dont require you to collect taxes. So only silver powersellers and up need to do that

[recped]

and it doesn't take long for a GST audit.

Obviously you've not had a GST audit......sure some can be quick and easy but others can be lengthy.

[pierrelebel]

"So only silver powersellers "

.... that is assuming sellers only sell on eBay. Most sellers use eBay as one of many venues where they sell their wares.

I frankly cannot see why a PowerSeller would not register for GST/HST, even if their annual sales are only $10,000. More so if a large percentage of their sales go outside Canada. .

[motivation_store]

yes, its very beneficial especially if sales are outside canada. However, it includes more complex tax understanding, and the need to incorporate perhaps and get an accountant. Its all extra fees, which is why I think most people shy away from GST registration.

[fatdane]

I have lost count of the number of GST audits. One was fairly involved but over the telephone. The balance were all done over the phone and were fairlyy quick. They were all triggered by the fact that the Government had to pay me money. The first auditor wanted to know the % of sales outside Canada and at antique malls ( where the mall handles the GST) and when the figures "made sense" to her the refund came fairly quickly. After that the audit consisted of an auditor calling and asking if my business was still selling outside Canada and at Antique malls - but it took the censored deleted auditors 4 to 8 weeks to do that. I told all the auditors when they called that I hope the devil lets me handle their paycheques at the same speed when I die and go to hades.

[new-id]

dont really think it matters where you are on the food chain it is just all to easy to match your sales downloaded from ebay with your claimed income.If it is at least close you should be OK.

I am sure the ease of getting totals that were kept on ebay servers all this time was just to tempting CRA.

Without at least some receipts to back up your cost of goods sold you really are screwed I would think?

Seems pretty straight forward.If the number is there it is pretty tough to deny the sale.You surely will some NPB but not a huge percentage.Paypal records which I am sure are kept should cover that end.

Sounds like a no brainer for CRA

[danvil1]

oh brother,is there really any good news that ever happens on ebay? not happy at all with this CRA crap.i am removing my power seller status right now.

[tesgartor]

I am not denying sales, just saying that i haven't kept receipts for the stuff i sold, and $1000 a month worth of sales were not dificult to reach if I sold 2-3-4 laptops a month... Now CRA sees I did $12000 a year and at the end because no receipts are kept, I made maybe $1-2000 profit a year which I haven't reported ;-(.

[itrecovery]

My GST audit took 2 phone calls and one fax. It was quite a nice guy on other end, no biggie.

I'm sure revenue will be higher for most sellers as we get paid for goods + expensive shipping + tax(es) (for people who sell over 30k/y), so non-paying business won't make much difference. But it's true, there are too many moronic buyers in electronic business....

[lina-mallows]

pierrelebel- you wrote "In an audit, Revenue Canada will check exactly how much was received through PayPal, bank accounts, etc... To claim 80% of sales have not been collected on an annual basis is ludicrous and goes against the eBay overall experience."

Is there anything anywhere in all of eBay's communications, that indicate any/or all of PayPal's information will be turned over to Revenue Canada?

Though eBay may have purchased PayPal- is the information PayPal holds subject to the same Court rulings?

Just a curious question- and likely the reason why many stay as far from PayPal as possible- and will likely continue to do so!

[pierrelebel]

"PayPal's information will be turned over to Revenue Canada?"

I do not think so. The information is available to CRA at audit time. .