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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.
" Then you will eat the tax as well."
That is correct. If a buyer claims a $10 items was not received and eBay accepts the buyer's claim, you still have to pay eBay fees of $1.00 on that transaction plus $0.05 in tax (GST applicable in AB).
dutchman48 - "To charge a fee on shipping is ridiculous"
We have all read your opinion on the subject several times over the last four years since eBay decided to follow the lead of Amazon on the fee structure by charging their fees on the total transaction value, not just the selling price. A very large number of sellers agree with you.
As we all remember, eBay lowered the FVF on most transactions when they instituted their new policy. Many sellers saw their fees go down as a result. That would apply to sellers who were selling on a "free shipping" basis (shipping charge included in selling price) or those with a very small shipping cost in relation to value. Also, because of higher shipping charges in Canada, it seems that Canadian sellers were negatively affected to a larger degree than their American competitors.
That said, there is nothing eBay or Amazon will do to change their fee structure. Time to move on .
God grant me the serenity to accept
the things I cannot change,
courage to change the things I can,
and wisdom to know the difference.
As we all remember
Unfortunately many eBay sellers, especially the "malcontents" never remember that fee percentages went down, listing fees went down, TRS discounts came into effect, reduced fvf's fees for Stores and free listing were handed out by the boatload.
Personally my fvf's went up, my listings fees went down and bottom line my fees did increase slightly.
Other sellers I know saw significant fees decreases, a few, those who sold cheap items with high shipping saw big increases. When you have to have a fee structure in place that covers MILLIONS of sellers it's impossible to design it where everyone comes out even or ahead.
You are misunderstanding the message.
Please call the CRA for clarification.
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