Taxes return on purchases

[rocketscollectibles]

I know as sellers we can request taxes return on items purchased for resale. I buy a lot on ebay and realized i pay a ton of taxes that i should not. Anyone can explain how and what to do to have taxes return on the purchases i do for resale? Or linking me a guide on the criterias and everything. 

[reallynicestamps]

You have to be registered to collect and remit taxes in order to get the rebate on taxes you pay.

Then as I recall youput the amount you paid out during the month on the return you fill in with the taxes you collected, and add a cheque for the difference if you collected more than you paid out.

Since you are not actually collecting the tax (eBay is) you would be getting a cheque instead.

Obviously since I mention cheques, my information is out of date.

But you don't get a rebate unless you are registered to collect taxes.

[flipistics]

And if you're registered to collect tax, you have to also collect and remit it on ALL sales where the marketplace doesn't, including local sales.

[ilikehockeyjerseys · Accepted solution]

When you are registered to collect GST for business activities, you are entitled to an input tax credit for GST you pay on anything you require for your business. You deduct what you paid in GST/HST from the year from what you collect. At the end of the year you either send the government the difference, or they pay you back the difference. 

As far as I understand it, you won't be able to get that money back if you weren't already registered at the time you made those purchases. It doesn't matter if eBay was collecting HST/GST on those sales. Although, you should double check this info with an accountant. 

If you aren't set up for GST, as far as I understand it based on for own experience, here is what you need to do to register:

-Register for a business number. (https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/registering-your-business/reg...)

-Register for a GST number tied to your business number. (https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/account-re...)

-Email CanadaGST/PST@ebay.com with your account info and attach a filled out GST506 form using Adobe Fill And Sign on your phone - https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/gst506/gst506-22e.pdf 

When you register for a business number, it is tied to your legal name. This is not the same thing as starting a coporation or stand alone legal entity. You are considered a sole-proprietor (aka self employed). This means that you would still file taxes as you normally would except that instead of using a T4 to input your income, you would self report your income (minus deductions) in the appropriate lines. You would be expected to keep reasonable proof of any deductions. For example, you spent $1000 on postage, you need to keep receipts.

Keep in mind that once registered, you must collect GST on all platforms. So you can't legally register for GST/HST and then pick and choose which platforms you choose to collect it on (eBay, Amazon, Facebook, Kijiji, Retail, Flea Market, etc). 

You also need to have an actual "invoice" for the purchase. That means, you need a receipt that has the breakdown of the tax along with the name and GST number of the business. If you look at a receipt next time you buy something from even a normal retail store, you might notice it has a number starting with RT on the bottom. If you are audited, they will want to see that these are legitimate business purchases. Or that there were purchases at all, and not just made up input tax credits. 

(I am not an accountant, this is not accounting or legal advice. Entertainment purposes only. All of this could be completely false and comes with no warranty, you would be a fool to not seek an actual accountant out.)

https://www.youtube.com/results?search_query=gst+hst+canada

Scroll through there, there are a ton of videos explaining this. 

[rocketscollectibles]

And what happen with the fact that eBay declare taxes collected in their own name, while it's our items sold? How this is dealt to have a taxes return on those items? Since i guess we cannot declare that we collected any taxes on those, since ebay did it already in their name. 

[regs43]

I was just audited and 98% of my sales are on ebay. So I get a refund from the government for the tax I paid out minus the few local sales / facebook I mailed to I collected tax on.

As mentioned above you contact

-Email CanadaGST/PST@ebay.com with your account info and attach a filled out GST506 form using Adobe Fill And Sign on your phone - https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/gst506/gst506-22e.pdf 

You get the joint election form filled out and ebay remits the tax each month. This form is only needed when you're audited to show proof that ebay collected the tax on your sales and you have an agreement for them to do that (otherwise your on the hook for the money you should collect for Canadian Sales). I got both forms signed; the one ebay provided and one that was mentioned on the Canadian Tax board in October 2023 when others were having the ebay one denied. The lady closed my case after looking at my submitted information and made no changes as all was above board. Now I wait for my refund

[ilikehockeyjerseys]

You have to sign a form that authorizes eBay to collect the taxes on behalf of your business activities on their website. 

(Email CanadaGST/PST@ebay.com with your account info and attach a filled out GST506 form using Adobe Fill And Sign on your phone - https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/gst506/gst506-22e.pdf )

You still have to report your sales in your return, but most people here have suggested that they should be reported as zero-rated sales (similar to US sale). Zero-rated meaning you didn't collect taxes on them. 

Put a few hours into reading and watching Youtube tutorials about registering as a sole proprietor in Canada, preparing profit/loss statements, and registering+remitting GST. If none of it still makes sense, consider paying an account to at least set up your business and get it to the point where all you need to do is keep records. 

I assume an accountant could set everything up for you to the point that you could track your own expenses, sales, etc and use something like Turbo Tax business to file your return. 

Again, I'm just a guy on the internet, not an account - so all of the above could be incorrect and is not actual legal or accounting advice. (I don't think I actually have to type that, but still.)

[rocketscollectibles]

Thanks everyone. I'm not ready yet to register it's just that i started to realize that i'm paying heavy amounts of taxes that i should not. Hurts a lot. I'll check some videos 

One random question while we're there. How do we keep proofs when we buy a bundle and some items on the purchase/invoice are removed for personal? Let's say we buy a bundle of 50 items for $500, each items has a different value, and we decide to remove some items for ourself. In our expenses we remove the value, but how do we present that invoice with total not fitting anymore with the declared total? Anyone keeps some items for them and know what to do? Do you write on your invoice that item X was removed and total is now Y?  Is it valid to add notes/remove items and adjust invoices total for declarations? 

[reallynicestamps]

That's between you and your concience.

When we bought an estate, which we did seven or eight times a week when we had a shop, it got broken up immediately.

The stuff we bought it for -the high value single items-  was immediately catalogued, priced and went into the general stock or a special customer got a phone call.

Then most of the rest became a "Big Box'o' Fun" priced from $10 to $200 and went on the table near the front of the shop for browsers. The price was usually well below catalogue value because no one wanted to put in the hours of "fun" to upgrade it.

Sometimes a BBoF buyer would only want some stuff and the box got repriced. Sometimes two or three small BBoFs got amalgamated.

And some stuff got tossed immediately- stripped annual collections and those darn centennial stamp boxes. 20 year old catalogues. Photocopies of copyright items.

Much the same with your bulk purchase. If you remove value you have to reduce what you paid. But in collectibles "value" is flexible.
A single Canada #345 is worth 2c as postage, has the minimum catalogue value of 25c (the dealer's labour basically) and  is unsaleable as a single stamp.

[ilikehockeyjerseys]

This would be a better question to ask an accountant, but I think what the CRA would want to see is that you are consistent with your method of determining the value of your inventory, and that you have a reasonable expectation of profit. As in, what you're doing is actual business activities, and not a way to profit off of claiming GST rebates as input tax costs. Or creating fake losses to lower your income tax burden.

If your entire business model is that you buy collections to breakup for individual sale, I suspect you would be fine with averaging the price of each piece, and then prorating it.

So if you bought a collection of 10 cards for $100+$10 in GST, and you kept 5 cards for your own collection and sold 5 cards, you could log each card in your inventory at $10, and then claim $5 of the GST as an input tax credit. 

Where you might get into trouble is if the value of the cards vary. Using the above example, if the 5 cards you keep have a market value of $95, and the 5 cards you sell have a market value of $5, using the above method would produce a loss of $45. I don't think they would accept you are acting in good faith.

It is always dicey with something where there is both a personal and business element mixed together. You would be better off not mixing both, but I understand that with collecting that is not always possible. Most people would suggest having a complete separation between business and personal. As in, a credit card that you strictly use for business transactions, if you buy lots off eBay to resell have an eBay account that is strictly our business buyer account. That won't save you from the CRA disputing your business activities, but it will at least show them that there is a reasonable separation between business and personal.

Again, I'm not an accountant. So my interpretation could be completely off. I would highly advise you to find an accountant who understands online sales and consult with them to at least get the backbone of your books setup. That way, you can continue to log everything on your own. 

There are also places like the Turbo Tax web forum where you may get more accurate and specialized advice. There are also probably subreddits or web forums where accountants hang out. 

[rocketscollectibles]

So if you bought a collection of 10 cards for $100+$10 in GST, and you kept 5 cards for your own collection and sold 5 cards, you could log each card in your inventory at $10, and then claim $5 of the GST as an input tax credit. 

Where you might get into trouble is if the value of the cards vary. Using the above example, if the 5 cards you keep have a market value of $95, and the 5 cards you sell have a market value of $5, using the above method would produce a loss of $45. I don't think they would accept you are acting in good faith.

It does not create false losses like this tho. Your exemple with the $45 loss consider that $100 worth was paid $100 actually. Most of time items do not have equal value, and expense removed is declared accordingly. But i meant more about when an invoice actually have each item value already separated. Exemple:

Invoice:

Item#1 - $20
Item#2 - $15
Item#3 - $30

Invoice total/receipt: $65

You remove item#1 - $20 for personal. But your proof of purchase still is a $65 invoice. You can declare in your expenses that your cost was $45, but your proof here still is an invoice of $65.

It is indeed better to separate personal/business activities but it is not always possible. And sometimes i would pay more if i separate, so it's non-sense, i'm just one individual running a self-business, it's normal to mix things. 

[flipistics]

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@rocketscollectibles wrote:

So if you bought a collection of 10 cards for $100+$10 in GST, and you kept 5 cards for your own collection and sold 5 cards, you could log each card in your inventory at $10, and then claim $5 of the GST as an input tax credit. 

Where you might get into trouble is if the value of the cards vary. Using the above example, if the 5 cards you keep have a market value of $95, and the 5 cards you sell have a market value of $5, using the above method would produce a loss of $45. I don't think they would accept you are acting in good faith.

It does not create false losses like this tho. Your exemple with the $45 loss consider that $100 worth was paid $100 actually. Most of time items do not have equal value, and expense removed is declared accordingly. But i meant more about when an invoice actually have each item value already separated. Exemple:

Invoice:

Item#1 - $20
Item#2 - $15
Item#3 - $30

Invoice total/receipt: $65

You remove item#1 - $20 for personal. But your proof of purchase still is a $65 invoice. You can declare in your expenses that your cost was $45, but your proof here still is an invoice of $65.

It is indeed better to separate personal/business activities but it is not always possible. And sometimes i would pay more if i separate, so it's non-sense, i'm just one individual running a self-business, it's normal to mix things. 

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In an ideal world that might be fine, but no auditor is going to want to try to figure out if the values you're assessing are reasonable.  It's also a lot of extra work and headache for you.

Generally, in a bulk lot I'll divide it up as evenly as possible between all the items regardless of their exact values. Sometimes, for the odd item I keep, that means "paying" more and sometimes less.  The exception would be something where the values are drastically different to where many of the items would have a cost associated with them exceeding their value.  For example, let's say I bought a $100 TV, it came with 2 remotes, and I decided to sell one. I wouldn't say $50 for the TV and $50 for the remote. That would be absurd. On the other hand, if I bought a bulk lot of 50 remotes for $100, 5 were worth $50 each and the other 45 were worth $15 each, I would just assign $2 as the COG for each remote.