Which numbers to declare incomes

[rocketscollectibles]

Trying to figure out things to declare incomes from selling from 2024 and i'm a bit lost. I look at my sales and perfomance and i look at financial statements provided by ebay, sales numbers never fits. I would guess the monthly financial statements are the only thing we should trust and use? But it does not include taxes paid by buyers? While i paid fees on taxes? We use numbers without taxes paid? 

If anyone has canadian articles explaining things about buying/selling declarations it would be welcomed 

[sparx_63]

Hi Rocket

I use the monthly statement from EBAY as a direct cost against my business.   In your monthly invoice from eBAY are the costs charged to you by EBAY, which includes fees you paid on taxes they charged to the buyer.  In this case, what the buyer pays in tax to EBAY is irrelevant to your taxation.

Hopes this helps you.  If you have any other tax questions you need help with, you may send me a PM and will will advise you the best I can.  

Sparx63

[reallynicestamps]

Since @pierrelebel retired a few years ago we have not had anyone with formal accountancy training as a resource on these Boards.

If you think you can fill those large shoes, Pierre also had decades of mail order experience, you would be very helpful.

[recped]

Personally the only numbers/documents I use from eBay is the full Transaction Report. It includes every single transaction, sales, refunds, shipping labels if any,  fees (transaction, store sub etc), GST/HST paid on fees. Load it into Excel (or similar), sort and total the relevant numbers.

That will get your gross revenue and eBay expenses. Then you need your all non-eBay expenses (cost of goods, shipping, supplies etc) to get to your net income.

[38e_avenue]

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@reallynicestamps wrote:

Since @pierrelebel retired a few years ago we have not had anyone with formal accountancy training as a resource on these Boards.

If you think you can fill those large shoes, Pierre also had decades of mail order experience, you would be very helpful.

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He made public and published here his detailed income statement for 2006 (sales, inventory, expenses, advertising, shipping supplies, postage, etc.). It might be usuful for people doing business here and filling out their CRA tax forrms. If interested, please let me know - can send a copy through PM. 

[rocketscollectibles]

I would take a look please. You can send it to me. Won't 2006 be outdated tho? 

[recped]

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@rocketscollectibles wrote:

Won't 2006 be outdated tho? 

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Basic accounting principles for small business haven't changed in eons. While most people use electronic methods these days it's always helpful to understand the basics.

There are more than a few actual printed books that provide all the basic information, well worth spending a few bucks and many hours of reading.

[sparx_63]

Hello All

Here is a PDF which is basically a fill out for the T2125 small business form.  The lines on the PDF correspond to the same line numbers in T2125.  This PDF is a sample of what I give to my tax preparer (financial guy) every year for the business income.  Keep in mind each line requires calculations and records kept such as receipts

in case of audits (I don't cheat lol).  This is a pdf copy of an excel spreadsheet that I made and use.

Please feel free to copy and use, add, make suggestions etc.

Hope this helps for those that may have some tax questions 

Sparx

[rocketscollectibles]

Is it a need to have numbers about opening inventory and closing in declarations or it's something you personally add? I do not have those numbers. I start with an inventory i built past years. I have no idea how much was spent or how much this is worth. I actually only count what is spent/sold starting from 2024 as my selling activities did go more serious. But i start with inventory built previously. Personally i'm also in a category where price change all the time, it's basically impossible to keep a track of the value. I also mix business and personal, so sometimes i don't pay for items, or keep items i paid for. 

[rocketscollectibles]

There are more than a few actual printed books that provide all the basic information, well worth spending a few bucks and many hours of reading.

Gotta be french and from quebec. I do researchs but don't find what i need (or don't know what i need) 

[byto253]

I only use eBay data to determine the value of amount sold, eBay fees and shipping charged to customers and labels bought through eBay.   

To get my data for eBay sales and expenses, I go to the Seller's Hub and select the Performance tab, then Sales from the left hand choice, and Last Year from the pull down menu and click Generate Report.  As shown in the first picture.   My dollar amounts have been whited out. 

After that scroll down to Total Sales.  Ignore the total sales amount, as that includes sales taxes, you want the breakdown below that.  Note: Sales taxes charged are not part of total income and not reported on your tax return.  

Take the "Item Sales" amount plus the "Shipping and Handling" amount, add them together and that is your total eBay sales amount for income tax and form T2125.   Shown in red in picture below.

Now scroll down to the Selling Costs section, and it will provide you with the total eBay Fees and Shipping Labels purchased.  As shown in green in the picture.

Note that the Item Sales amount is net of returns done in the year, I checked that against a transaction download last year.     

As a sidebar, my payout and eBay expenses are in US dollars so I generate reports by quarter and apply the average exchange rate per quarter to get the CDN$ values for eBay related costs and sales.  To get the average exchange rate per quarter, I get the monthly rates from the Bank of Canada website and do an average per quarter.   You can also download sales and expenses per month and apply the rate per month but per quarter is acceptable per the public accountant in the family.   

[sparx_63]

Hello

The inventory is a requirement as a line item.  The first year that you declare your business will have a zero from the previous year.  I keep a spreadsheet of all my sales, dated.  Each item I list has a word document with all the information, what I paid for it, where I got it, what it sold for, weighed , size shipped, shipping cost etc.  Each time am item sells I update the runnin total spreadsheet an mark the item out of inventory.

To keep inventory "correct" on the books, only what I purchase with recipts are added to new inventory for that year.  When an item sells that does not have a recipt, such as from a garage sale  or marketplace, I add the cost of the item also to inventory, but it also comes out of inventory immediately as a sold.

If you have no idea what you paid for an item, put a realistic number on what the item is worth less what you would mark it up for sale.  I use 100% markup on most items i sell that I cannot remember.  

If prices change in a category, that does not affect inventory value. The value is the point where it sells at.

Hopes this helps with your questions.  Sharing information between all is the best way of improving everyone, if someone has better ideas please do not hesitate to share 🙂

Sparx

[38e_avenue]

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@rocketscollectibles wrote:

I would take a look please. You can send it to me. Won't 2006 be outdated tho? 

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I don't think so. There are numbers only. Check your PM. 

[ricarmic]

I might be wrong and things may have changed since the time a LONNNGG time ago when I had to move my inventory in, but when I moved from non business to business, I had to set a "beginning" inventory valuation of the fair purchase market value (ie what my cost would have been) of what the inventory was worth at the beginning of that first official year*.

This has been said many times before, but spending some $$$ with a real accountant up front can save lots of headache and $$$ache down the road. You can simply get their help to figure out how to set things up and you can follow that process yourself going forward. The $$$ spent is a valid business expense as well...

*Mathematically 0 would not make sense:

First year:

Beginning inventory       0

Purchases                          $100

Ending inventory             $100  or Zero? What would one pick

Cost of Goods Sold       $0 or $100

Say sales of $2,500

Less COGS        100

Gross profit   $2,400 

which would not be correct as the stuff sold that wasn't declared as  beginning inventory did cost something so the profit is overinflated this way.

[rocketscollectibles]

Ok thanks actually the 'inventory' number is the number spent on items. I will have that from 2024. But what if i start with an actual inventory built from previous years, could it cause issues if my declarations starts from $0 inventory? My incomes will still be declared based on what i already have too. 

[sparx_63]

Just declare the items not currently in inventory, as inventory when you sell them.  Also do this to items you cannot provide receipts for.  It helps to remember what you paid for them, but you can also use a number less than actual market value. (I go with about 50% of market on a new item and 25% on used items.  The inventory is only a running total anyway, the only number that is used in yearly deductions is what you paid for the items that sell.  The inventory only has taxable value if you close or sell the business.

[sparx_63]

When you start your business you have in effect zero inventory from a previous year, as you were not in business that previous year.  What ever year you start your business, your starting inventory is "purchased" that year.  Whatever is sold comes off the inventory and whatever is not sold is "inventory" and is moved to the following year as previous.  Your calculation for gross profit is 100% correct.  You need to add a value of items that are sold that are not in your inventory, because theoretically, if it is not in your inventory of sale items it doesn't exist (for tax & accounting purposes).

Say sales of $2500

Less COG's (with receipts) $100

Less COG's wherever they came from, give them a value, they are inventory

Gross profit = sales - first COG - second COG

[rocketscollectibles]

Just declare the items not currently in inventory, as inventory when you sell them. 

Would be a total mess for me. Im into trading cards, cards come and go. My inventory is fully mixed. By issues i mean is it fine to just not declare inventory if i still declare the incomes coming from it? I think i'm in a total mess since i did not declare previous years. I turned personal selling activities into small business basically. Exemple i can spend $2k and sell for $3k in a month, but in those sales, there a bunch of things from previous years. And it's impossible to sort thousands of cards and know what is what. Just wonder what kind of trouble i could run into if i do not declare that previous inventory at all in my numbers. Is it more on the personal or on the legal? Cause i don't mind having no numbers on that inventory personally. 

[sparx_63]

My thoughts on the inventory question.  I monetize (give a inventory value) to my non-receipt items when I list them.  They are added to inventory and removed from inventory if and when they sell.  So, if a person sells something this year that was listed in a previous year, which was not in inventory, they could put a dollar figure on it for inventory purpose for this year.

My thoughts on getting into trouble on declarations.  Personally as far as taxes go, I myself hope for the best but prepare for the worst.  I realize that everyone has a different circumstance as far as their selling "situation" on EBAY.  An EBAY seller must decide whether or not they are a "business" or just selling a few things from their home.  If they are a business, they have to by Canadian law declare income.  It is possible that the worst may happen, like an audit.  Is your business prepared for this possible outcome? 

My thoughts on personal or legal?  On an on-line reselleing business like EBAY everything you own is a potential sale.  Is it all inventory?  My guess is that things you purposely buy for resale should be in inventory (stuff you have receipts for).  Other things is just stuff you collect (like stamps) ....until you sell them on EBAY with your other business stuff ....

OMG I am ramblin....

Sparx

[flipistics]

I *think* the recommended way for garage sales is to have a log book where you write down the address, time, what you spent, and a quick description of what you bought. I think there was something where it's recommended to get a written receipt if it's over a certain amount too.  I believe it's also recommended to take cash out of the bank at the start of the day and put the remainder back in at the end, with the difference obviously matching what you spent. 

I don't do that with the cash since my business account charges for cash transfers and most purchases I make at a given sale aren't significant expenditures. I find that my hands are often pretty dirty when digging around at sales and a log book would get messy really quick, so instead I just print out a list of the sales I'm going to on a given day and write it in beside the address. I then keep that sheet just in case I ever need it, which I probably won't. I don't know if that would hold up or not, but it's certainly better than nothing and also helps me make sure that I know my correct COG when I record the items in my inventory. I also have a CRA compliant mileage app on my phone that automatically records the time and location of the stops, so that should match up as additional proof of at least having been there.

There is a page on the CRA website that talks about bringing starting inventory into a business. I think all the goverment is really interested in with regards to inventory is that you are being honest and not running the business as a slush fund or to avoid taxes on personal items, which keeping track of inventory cost and item count can theoretically help do, but you should talk to an accountant on that.