eBay Canada Tax Questions

[valuabledeals]

Hi everyone! 🙂 

Sorry for the newbie post. I would appreciate some help with this. 

This is my first year eBay selling (2016) and I am wanting to know how taxes are paid.

1. How do I report/submit? 

2. What is the tax rate? (for under 20k) 

3. Can I just not deduct expenses/inventory? I know that sounds stupid but I just want to get this years taxes done no matter what they are and for 2017 I will start calculating expenses and everything in an Excel sheet. 

Thanks to whoever replies! 

[cumos55]

You need a tax accountant.....someone who understands selling online...  on eBay sepecifically

[valuabledeals]

Well I'm guessing people do their taxes here and understand my newbie questions. However I will sit down with an expert sometime soon. How can you find an expert specifically for eBay/online selling?

[pierrelebel]

Good evening.

One step at the time.

First you add up your sales (in Canadian dollars)

Then add up your cost of sales (how much you paid for the items you sold)

Then add up your expenses (eBay fees, packing materials, supplies, etc...)

Deduct your costs of goods to get your gross profit and your business related expenses  to get to your net profit.

Enter your net profit on line 135 of your tax return.

Here is a sample I prepared many years ago for eBay sellers.  The form is acceptable to Revenue Canada. You can adapt it to your needs.

http://pierrelebel.com/lists/P&L-sample.htm

The rate of income tax you pay depends on all your other income (salary, commission, investment, pension, etc...).  The profit you make on eBay (line 135) is simply added to all your other sources of income.

[vintagenorth]

1. Report your eBay income on your T1 General tax return along with any other income you have.

2. Your tax rate, Federal and Provincial will depend on your net income.

3. There are special guides and forms T2125 that will help you with your calculations. If you need more guidance refer to the CRA publication on Busuness & Proffessional income. You can get this on the internet from the CRA site.

[vintagenorth]

Hi Pierre, I might have known you would have answers for him. You are a faster typist than I am! 🤗

[cumos55]

valuabledeals....

Meet our local "eBay tax accountant"  Pierre 

Each of us as sellers on eBay Canada has learned what to do when tax time arrives.

Pierre has been a most valuable asset.

[valuabledeals]

Thank you so much for the answer 🙂

I have a very messy idea of what my expenses are and what the cost of my sales were. I just wanted to test things out for this year and did ok.

I don't want to have any issues with the CRA. I could just be paranoid I guess.

Could I just report my net income for this year? I know thats paying more but I don't want to take guesses. Also if you know the tax rate for under $15,000 total income (I just did eBay) please let me know.

Thanks again for the great answer!!

[pierrelebel]

'Could I just report my net income for this year?"

No.

Messy?  What does that mean?

Take a few hours and go through your PayPal account - assuming all transactions were paid through PayPal, that should be pretty easy to add up all the money you have received from PayPal to your bank account during 2016.

Then add up your costs of goods.  How did you pay for them?  Cash?  Credit card?  Debit?

Then add up your expenses.

If you do not have the exact amount for one or two purchase transactions, make a fair estimate.

"$15,000 total income (I just did eBay)"

I am not sure what that means.  Are you suggesting that you have received no money whatsoever from any source (employment, investment, pension, etc...)  If so, how did you live?  How did you buy your food?  pay your rent?  etc...

If you had no income whatsoever from any source and lived in Ontario, the few thousand dollars net income generated by your eBay business will NOT attract any income tax (federal or provincial).

For income tax purposes, are you considered a "dependent" by someone else (a parent, guardian, spouse, etc...)?  Your net income may affect their claim.

[valuabledeals]

I lived with my parents. I can see the exact income on my eBay and Paypal yes. Just the expenses like shipping and what I paid for the items or what I paid to fix them up/refurbish them I don't know really. A lot was paid in cash and some I made myself or fixed up myself. I don't just want to make an estimate and possibly be wrong. I'd rather over pay that to do it wrong. I read of some people doing that to be better off but I think they are higher earners than me.

thanks for replying to a new guy like me. You don't know how much I appreciate it.

[pierrelebel]

"I lived with my parents."

This is where it gets tricky and professional help - familiar with your personal circumstances (which should NOT be discussed online) - may be required.

If a parent claims you as a dependent child, then they need to deduct your net income from their claim - this is where it is important to only report your net income (as close as you can estimate it), not inflate it.

Also, CRA likes taxpayers to be consistent in the method they use to determine their income.

Do the best you can to determine your net profit (after deducting estimated costs and expenses).  Based on your posts, you will have no income tax liabilities for 2016.