Canada Expense tax

[urbansearch]

I work 9-5 job and made $25k after taxes. I started selling on amazon and eBay last year April. I had $28k in sales in 2019. Amazon I sell in Canada and eBay I usually sell on .com My expense sheet I only wrote down whatever I had the receipt for The section I’m confused is the inventory part. So I buy ALL my stuff from thrift stores book and games I buy and sell on amazon and toys and other random I sell on eBay. In total I’ve spent $7760 on items in thrift store but not everything has sold. Can anyone suggested how to do this part ?

[reallynicestamps]

All the items you purchased are inventory and an expense.

Whether they sold or not.

Your postage and packaging materials are also an expense. Even if you still have some of them unused.

Free advice is worth every penny you pay for it.

[recped]

Inventory is NOT an expense, inventory is an asset.

[ricarmic]

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@recped wrote:

Inventory is NOT an expense, inventory is an asset.

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Until it is sold then it is part of the cost of goods sold.

Based on what I see in your note, one presumes you do not know how much margin you had on a piece by piece basis (ie you do not know how much of the $7760 is left).

If you are able, figure out what the value of the unsold stuff still is. For ease of calculating, assume it is $2,000 then that means you know your acquisition cost of goods you sold last year includes the $5,760 original cost, which is part of your cost of goods sold plus all the other actual expenses like postage, envelopes etc etc that you take off your sales to figure out your profit.

Otherwise you could maybe approximate the % markup on each item on average if that is possible.

Really, it would be much advisable to get the help of an actual accountant to help you understand the proper process to document everything. It will be an up-front cost that will save you an awful lot of time and worry down the road. Taking the various ideas from here is just like reallynice says, worth every penny spent

[fatdane]

Get thyself to an accountant as quickly as you can, but make sure that the accountant has some knowledge of mail/internet order business.

At sales of 28,000 you are just about at the point where you will have to register for GST or HST depending on your Province or Territory.

You will have 2 different types of tax to worry about- Income tax and Goods and Services Tax. A lot of postings on these boards show a lot of people get them mixed up.

If you are selling over 30,000 you MUST register for GST/HST, and you MUST remit GST/HST for sales to Canada, but not for sales outside Canada. If you sell mainly outside of Canada you may get money back from the Government.

If you have a profit from your sales, then you must include that profit on your Income Tax return. If you have a loss and include the loss on the return you may end up with a refund,

If you can dig thru old postings on these boards look for postings from Pierre Lebell. He explained in fairly simple terms what a seller has to do in regard to taxes.

[cumos55]

If ... sales ..plus ...postage ....is greater than $30,000  you must register for GST/HST

A buyer pays one lump sum to the seller,  and then the seller pays for postage

[ypdc_dennis]

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@cumos55 wrote:

If ... sales .. plus ...postage ....is greater than $30,000  you must register for GST/HST

A buyer pays one lump sum to the seller,  and then the seller pays for postage

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Not precisely true.  It is what the buyer pays (item+shipping) to the Seller that counts.

What the Seller pays for postage has nothing to do with the GST/HST requirement.

-..-

[urbansearch]

Hey thanks for the reply I did a quick count and to make the $28k sales I spent only $5000 so on my spread sheet I would change the $7000 to $5000 ?

[ricarmic]

I am very worried about answering this because I don't see any $7000 numbers in your earlier notes.

You originally said you spent $7760 on thrift store items last year.

If you've identified that you sold $5,000 worth of them, that means you have $2760 "inventory" that you are carrying over, which as recped mentioned is an asset going into next year.

So the $5,000 of inventory that was sold comes off your sales as part of the cost of goods sold, along with other expenses etc.

As mentioned a few times, you really really should get some assistance from an accountant to show you how to set things up so you'll know what to do each year going forward. It will be money well spent.

[tryubik-useonlyasdirected]

This is one for Pierre Labelle?, the accountant, Can anyone recall his handle?

There is a learning curve here but if you did that well on eBay you should catch on fairly fast. Find a book keeper, get them to lead you through one year (it typically costs $250 or so) then if your confident you can copy off that in the future and save yourself the yearly cost.

Basically make a statement of Income and retained earnings and know the figures. This sorts out the numbers and you include it with your taxes. There is more to it than that but I found this sheet was the most helpful when I was starting out. (Pierre lent me a hand 🙂

And if you have to register for a tax number don't forget your ITC's!

You get any tax you paid out - back 🙂

Attached is a fictional example. (This is not advice - talk to a book keeper for that!)

[femmefan1946]

@pierrelebel   But he retired due to vision problems, an unfortunate situation for a stamp dealer.

It would be lovely to hear from him though. For old times' sake as well as the current problem.

[retroman_studios]

It may not apply to your specific situation, but in my tax program it explains on hand stock as including raw materials.

So if say you are someone (like myself) that creates things, it gets more complicated as you have to include projects that are not completed, extra materials etc.

One rule of thumb that I "generally" follow is that if I don't have a receipt or a digital account, I can't count it. So for example, suppose I bought something at a yard sale and you don't get a receipt, you would need to be careful as if audited, you need proof what you claimed is true. For this reason there are some sales I never include the base coat in my purchases of the year as if I am audited, I can't prove anything.

[darak10]

my accountant told me its 30,000 / yr OR four consecutive quarters, so either way once you're in it a year you have to start collecting tax. 

[darak10]

I hope you kept the receipts for everything.  

follow others advice and consult an accountant.

inventory is both an asset you make money on and an expense as you need to buy stuff to sell stuff.  Since you work another gig this could be to your advantage as it may allow a write down on your overall taxes (claiming purchases for online sales as expenses).  You can also claim other fun stuff if you do this at home like percentages of mortgage/rent, property tax, internet connection, vehicle payments & vehicle repairs (you are driving around shopping for stuff right?) and lots of other stuff.  Long story short, go talk to an accountant.  To do your own taxes while running your own business is not a wise decision unless you are a CPA.