When dealing with taxes, prudence is best.
If the amounts justify it, hiring a competent account experienced in mail order is the best approach.
As far as claiming "occupency costs" as a business expense to reduce net profit, a few things to keep in mind:
1) the space claimed as a deduction must be one or more rooms used exclusively for business purposes. A table in the corner of the living room does not qualify.
If your house or apartment has 1,000 square feet and one room (10'x10') is used exclusively for business purposes, then 10% of your occupency costs can be counted as business expense.
2) if the space qualifies, then you need to look at each qualifying expense. Applicable percentage of rent is acceptable so is the interest portion of the mortgage payment (NOT the principal). Most utilities (hydro, heating, water), home insurance and property tax qualify but not the telephone unless it is used exclusively for business (most likely not for online business).
So, if your rent (or mortgage interest payment), utilities and home insurance total $ 8,000 a year, and 10% of your house or apartment is used exclusively for business, $800 can be charged as a business expense when preparing your Profit & Loss Statement.
"Without internet, you can't run an online business"
If your internet is used exclusively for your business, no problem. However, if you or members of your household also use the internet for other than busines purposes, it is generally not allowed.
If your tax return is audited, and you make a claim for occupency costs, you can expect the auditor to bring a measuring tape and actually measure the house or apartment and the space used exclusively for business. I know, the tax auditor did it in my house.
3) Occupency costs cannot be claimed if the business is losing money or if claiming these costs would result in a loss.
cumos55 wrote; "and you may find that no taxes are owed on eBay selling."
I think you live dangerously.
To state "no taxes are owed" suggests no profit was made. If you spend much time purchasing goods for resale, list them on eBay, package and ship them to buyers, allow a large portion of your home to be used for business exclusively and, at the end of the year you have NO PROFIT to show for it, why bother?
The purpose of being in business is to make a profit.
Tax auditors know exactly what to look for at audit time. While the rules and regulations offer some limited interpretations, it is always best to be prudent.
"2 large walk-in closets that I came up with the 3% for."
That makes sense.
You should have no problem deducting 3% of your occupency costs (as outlined earlier) as long as your business is profitable.
Good Luck.
"if profit is..."
Profit can easily be calculated using this sample P&L statement I prepared a few years ago:
http://pierrelebel.com/lists/P&L-sample.htm
It is very similar to the one suggested by CRA.
If you show profit on the bottom line, that's all good and that is the amount to be reported on line 135 of your tax return as business income. It will be added to your employment, pension and investment income to determine the taxable income.
The fact one is employed or not has nothing to do with the deductions allowed as business expenses.
For example, if you use 10% of your home exclusively for your eBay and online business, then 10% of your occupency costs are deductable from your business income, regardless of how much money you make from employment or investment.
The tax department uses guidelines to determine which tax return will be audited. For example, if - in addition to employment income - a taxpayer shows $20,000 in gross sales every year but no net profit, odds are good that return will be pulled for audit after a few years. Also, if eBay shows the taxpayer had gross sales of $30,000 in the year but only $20,000 was reported by the taxpayer, an audit will definitely be called.
Most tax audits by the way cover a two year period, unless the auditor finds a serious under-reporting problem. Then... you do not want to know 😞
