@dogepenguingames wrote:
Hi. I'm a 20 something college student who has decided to make a few bucks selling off my personal video game collection, as well as flipping the titles i've found at garage sales and the like. All used personal property. So far it's been a fun way to make a few bucks and i've been treating it like a hobby. I'm approaching nearly 2k in REVENUE after a few months, but after all expenses, shipping, packaging, and the costs i paid to acquire things initially it's currently around 500$ in profit and growing. I am located in BC. I've been keeping a spreadsheet that records all my costs, but i don't have much in terms of receipts because garage sales and cash.
Good job! You have quickly recognized the importance of keeping careful records, and are already thinking of next steps. Very good.
From a tax and legal stand point, what do i have to do? I was assuming i merely had to put 500 or whatever it ends up being under my personal income on my taxes.
I'm afraid reporting business income is not quite that simple. My advice would be to operate as a "sole proprietorship", there is no advantage in over complicating things and adding overhead by thinking of incorporating, or registering a business name ie: "The Super Video Gamer Company"
Operate under your own legal name. For example if your name were "John Smith" your ebay "individual" account would be registered to "John Smith", the bank account used to receive business funds would be a personal account (preferably an account for that purpose alone) in the name of "John Smith", purchase business supplies under the name "John Smith" and use a payment method in the name of "John Smith". Your invoices to customers would be in the name of "John Smith".
Down the road if you are required to register to collect GST or feel it makes business sense to do so voluntarily you would apply under the name "John Smith", sole proprietor. Everything done related to the business would be under the name and control of John Smith, sole proprietor (sole owner).
Do i need to collect / pay provincial/federal sales tax? Am i required to register for a business license here in british columbia?
I've never conducted business resident in B.C., check with the Provincial Treasurer office on B.C. sales tax requirements.
Right now it sounds like your gross sales are well below the threshold for mandatory GST registration. Another poster mentioned the 30,000 annual gross sales limit which is correct, that said I believe there is also a quarterly limit mechanism, in other words if gross income expands very quickly on pace to exceed the 30,000 annual it's possible registration may be required prior to the 30,000 mark being reached. I've forgotten the details. Sometimes it is worthwhile to register for a GST account voluntarily to recover GST paid on business expenses.
In my opinion I don't think you need to concern yourself with a municipal business license. If you were proposing to run a hair salon out of your basement or a HVAC business out of your garage then perhaps yes, those sorts of activities involve a regular coming and going of customers or having the DESCO plumbing supply truck delivering twice a day. Those sorts of activities tend to draw complaints from the neighbours which is precisely why Municipalities like to issue business licenses, they use them to control commercial businesses attempting to operate in residential neighbourhoods. One person selling DVDs from their computer in the back bedroom is not going to need a business license.
Some are confused by the terminology used when registering for a GST account. When an individual registers for the GST as a sole proprietor, Revenue Canada issues a Buisness Number (BN) that applies to the individual. The individual uses that number as an identifier for the various Federal programs like GST/HST, Payroll, Income Tax etc. The BN is NOT required until it becomes mandatory for the individual to apply for one or more of the Federal programs mentioned.
I'm sure these questions can be answered by digging into the wall of text that is gov.bc.ca but i figured i could pose this question to the canada ebay community as well because im sure there are many of you that started in a similar situation, and may have advice for me. Thank you.
If you are serious about developing a small business I highly recommend exploring the resources available on the CRA site. At a minimum download the T2125 Statement of Business Income form found at the link below. This is the form that you will need to include with your T1 General. It is a good idea to setup your spreadsheet in such a way that the columns map directly to the applicable lines on the T2125, doing so simplifies the transfer of info from spreadsheet to form. Remember there is a new version of the form issued every year, so this version applies only to the 2020 tax year.
T2125 Statement of Business or Professional Activities - Canada.ca
Below is a link to Guide T4003 which is required reading if you want to learn how to complete the T2125 form. There are supplementary forms that may be required, the Guide will explain those. In the situation as you described, I doubt you need to worry about the Capital Cost Allowance section. At this stage I definitely would not recommend trying to claim any business portion of home expenses like hydro, home heating, property taxes or anything along those lines, don't expect your business use would meet the requirements to make that sort of claim. If there comes a point where you find yourself driving all over the place on business errands you would be justified in claiming a portion of automobile expenses. Here, an accurate log book of kilometers driven for business purposes must be kept to determine what percentage of gas, repairs, maintenance, license and CCA to claim.
Read this guide front to back, and back to front several times with the T2125 in front of you. Don't be fearful of the CRA, if you file something out of place they'll let you know. lol. Seriously though, corrected forms are re-filed all the time, it's not that big of a deal. Filing as a simple sole proprietor of a business as you describe is not all that difficult.
Self employed Business, Professional, Commission, Farming, and Fishing Income: Table of Contents - C...
When you come across a difficult subject, and you will, search the CRA site for Interpretation Bulletins on the subject, those often clear up how to proceed.
