Tax time Canada how to exchange your USD sales to CAD dollar profit

[jackets_and_gems]

Hi. I am en eBay Canada seller Currently listing and selling in USD on eBay.com. this is my first tax year for eBay and I am wondering how other Canadian sellers calculate the exchange from USD to CAD. Daily monthly or yearly. I am using the monthly noon average. I hope it will suffice. I have daily sales but it is so tedious to record all the info on each sale as eBay and PayPal give you monthly totals for everything at the end of the month. I would rather be out sourcing and building my business . Anyone with experience could you let me know. ? Or can I call the CRA and ask them. Do they answer these types of questions

[recped]

CRA will accept just about any method you like. The monthly average is probably the most used but quarterly or annually would also work. One thing CRA likes to see is consistency, if you use monthly this year, use the same next year and so on.

You could also use the actual rate which would be the value of your US Dollar sales when converted to CA Dollars. This will only work if you are converting all US Dollars to CA Dollars on a regular basis or at least converting all your 2016 sales by the end of the year.

As mentioned the important thing is to be consistent, if you have an audit you don't want to be trying to explain why you used one method this year (because it was beneficial) and then a different method next year because it was more beneficial in that year.

[silverpinups]

Speak to your Accountant or ask your Bank for a "yearly average" on the exchange rate from USD to CDN (Jan-Dec/16).

This would be the best and most consistent way to approach it when declaring your eBay sales for income tax purposes.

The converted rate for last year (2015) was 1.27871 CDN.

[rose-dee]

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@jackets_and_gems wrote:
Hi. I am en eBay Canada seller Currently listing and selling in USD on eBay.com. this is my first tax year for eBay and I am wondering how other Canadian sellers calculate the exchange from USD to CAD. Daily monthly or yearly. I am using the monthly noon average. I hope it will suffice. 

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You can use whatever system of conversion you prefer, but I agree with the others that you should choose one and stick with it. 

Personally I find that using the Bank of Canada annual average exchange rate (a perfectly acceptable option for CRA) is easiest, as it only requires one calculation, not a whole series. 

You don't need an accountant to tell you the rate, it's available for anybody to see.  Simply look it up here for the year involved (but be aware that the 2016 average rate won't be posted until early 2017): http://www.bankofcanada.ca/rates/exchange/annual-average-exchange-rates/

[cumos55]

Another option is to keep a record of every exchange, US to Canadian dollars on a spreadsheet.

Then at the end of each year.

add up the US dollar total for the year... and add up the Canadian total  for the same conversions.

and.... then Calculate the exchange rate for a specific year... total Canadian dollars divided by total US dollars......specific  for your set of conversions...

When you do it this way the exchange rate is a value  after the cost of conversion of US to Canadian dollars has been deleted.

The Bank of Canada rate  is before the cost of exchange

The cost to convert US to Canadian dollars is about 2.5 %.....  That is abut $25 US for every $1000 US converted to Canadian dollars....

[ypdc_dennis]

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@jackets_and_gems wrote:
Hi. I am en eBay Canada seller Currently listing and selling in USD on eBay.com. this is my first tax year for eBay and I am wondering how other Canadian sellers calculate the exchange from USD to CAD. Daily monthly or yearly. I am using the monthly noon average. I hope it will suffice. I have daily sales but it is so tedious to record all the info on each sale as eBay and PayPal give you monthly totals for everything at the end of the month.

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CRA will accept a variety of ways to do it, just as long as you are consistent. CRA does have suggested conversion rates on their website.

My US$ sales are few per month, so I record the sale info transaction by transaction using paypal conversion rates for the day. If I had a lot of US$ sales then I'd probably switch to simpler method.

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