tax return with ebay income by selling my own collection

[e.j.kim]

Hi,

I hope I can get some answers from here regarding to my tax return. I’m a taxnoob. This is the first time filing tax return with ebay income. I've only done with the slips I received from the employers in the past. I'm using a tax software right now and I'm looking at T2125. This seems to be only form that I need to work on.

First, in the identification, Have I input correct answers on these?
What's your main product or service? Selling used DVDs on ebay
Industry code? 418990 – All other merchant wholesalers

I'm a hobby seller who doesn't charge tax on the listings and what I'm selling is my own collection - mainly used DVDs. Since I haven't made much money, I was hoping to make it pretty simple.
Total sale - $10,000
shipping cost - $3,000
ebay and paypal fee - $1,500
Shipping materials (envelopes, bubble wraps, and etc) $500,
So, the actual income comes to $5,000.

But then there are some confusing parts because of my situation. First thing is that Cost of goods sold. Again, I’m selling my own collection that I’ve collected over the years. I’m not a retailer, so I have paid full prices. Also I paid much more money than what I’ve sold. Some of them have some values, but DVDs were very expensive in the past. What I’m concerning is that, if I input the actual prices(or at least half prices), then most likely the net income (loss) will be in 2 or 3 digits, or minus. Would CRA be suspicious about this? Also, if net income (loss) becomes lower than 3,000, Is it even worth filing it?
This is how I input in Cost of goods sold
Direct wage costs 8340 - $0
Subcontracts 8360 - $0
Other costs 8450 - $5,000.00

Another thing is that it’s with Do you have inventory? I’ve been maintaining my listings around 300 to 400 with the amount of $50,000 to $70,000 by adding up listings every month. Again, If I input the numbers below, then net income (loss) becomes minus which also seems to be asking for a trouble.

Do you have inventory? Yes
Opening inventory 8300 - 7,000.00
Purchases during the year 8320 - 5,000.00
Closing inventory - 70,000

Could someone please share some lights on my situation? I’m still learning about T2125 at the moment.

If you are going to leave any negative comments by any means, please resist your temptation and move on. I’m very stressed already.

[mcrlmn]

I'm a hobby seller also, and since my sales and particularly profits don't cross the threshold, I don't stress about filing anything eBay.
Purchasing a license toward write-offs wouldn't be lucrative for me.
CRA doesn't have a clue about your private collection

A taxable capital gain is 50% of a capital gain.
As you probably know, the capital gain or loss is calculated by deducting the original, easily exaggerated cost of the asset from the proceeds received on the sale of the asset.
You can claim your taxable capital gains on your yearly personal tax filing if you'd sleep better.

[cumos55]

If you are selling personal items, and nothing else  you do not owe any tax on your sales...

This is your personal collection that was bought originally for personal use...  and not for resale.

Nothing has to be reported as income

----------------------

However, there is a second situation  called ..................capital gain

You would have to sell something for more than $1000 in order to report a capital gain... or loss on your tax statement

If you sell something for over $1000 then you could have a capital gain.

If something was bought  years.. or decades ago  for $200.... and then you sell it for $1500.

You will have to report the dollar value over $1000... a capital gain of $1500 - $1000 = $500

A capital gain of $500 would be reported as a taxable gain....

If this item was originally bought for $2000  you would have a capital loss ... $2000 - $1500 = $500 that would not be reported....  on your tax statement.

It looks like you have ....no... business sale income,  and then ...  no ... capital gain, the sale of a personal item over $1000

Nothing to be reported on your tax report to Canada Revenue Agency

[cumos55]

You might also want to consider opening  a store.....on eBay

[recped]

If you are actually currently buying Inventory with the intent to resell at a profit they you are REQUIRED to report the income (and take every deduction you legally can).

If at the same time you are selling items you purchased years ago solely for you own use that is where it gets complicated, you could assign a fair market value based on what you paid at the time (a believable one since you probably don't have any documentation) to create a cost of goods.

If you are ONLY selling things you bought for personal use and are not current purchases then the personal goods rules apply, other posters have covered that fairly well.

[darak10]

I'd speak to an accountant or CRA themselves.  To be honest I think some of these other posters may have a point as you may be worrying yourself needlessly.  

It only starts to matter once you hit 30,000 / yr and are at the point where you need to find out whether or not you need a GST number, and you can speak to an accountant or CRA about it as well.  I wouldn't worry too much about this if I were you, its not like its adding a lot of $$ to your bottom line and you have a lot of expenses (as comes with this gig).    Capital gains isn't really applicable to this and is more regarding profit from large real estate sales and the like.  

You may want to find out about the values of sole proprietorship (enabling you to claim all your deductions & expenses, which is a great boon for home based businesses like this as you can claim part of your mortgage, utilities, vehicle, property taxes, etc, etc.) or applying for a business license in your home town if you plan on continuing to do it long term.    

[cumos55]

Everything being sold on eBay was originally bought at a retail price for personal use.

You are now selling a lot of those purchases......  for less than the original purchase price....  No income ..No report  of income on a tax form

The only consideration is capital gains or capital losses...but ....only if something was originally purchased for more than $1000.... or... sold on eBay for more than $1000.

Visit a tax accountant to verify everything.

[cumos55]

If you run a business out of your personal residence.... Your house....

Never charge the business rent... because the owner of the house must report that rent as income.

The business must never pay a part of a mortgage...  because when the business ends, the owner of the house must buy back the part of the house now owned by the business... and then the business must report that amount as income.

A business in a house can pay a part of utilities, based on the percentage of the floor square footage utilized to run the business. The business must be using the.... total .....of a room and not a part of the room... 

Inventory is held in my bedroom,  but this part of the bedroom is not included in the calculation of how much of my apartment is used for business

Always be careful

[cumos55]

If you sell everything at a price that is lower than the original purchase price...

You have no taxable income....  and all of the costs of selling those items  are to be paid by you

[tryubik-useonlyasdirected]

@cumos55 how do use-of-home property taxes work? Are they considered a utility or is it then like a rent?

[tryubik-useonlyasdirected]

This is a question we share. I'm helping a family member sell personal items at the same time selling items as a business. So there are two types of sales - 1 is business (getting the hang of this), 1 is personal (require clarification).

Business items follow the method you show.

As far as I can understand any personal item $1,000 or under (as long as it wasn't purchased with the intention of resale) doesn't have to be reported. Only personal items that are over that amount require reporting as they are capital gains.

Does anyone know if personal sales change if they are being sold on the same eBay site as items for business? Creating a separate site is expensive, time consuming and the extra traffic always helps. The records for business materials are clear, often we have proof personal items were purchased many years ago but occasionally its a matter of pattern.

[e.j.kim]

if I open a store, is there any benefit regarding to tax return? For example, some kind of slips showing total sales income and fees for the whole year? I could only see the invoices from ebay for past 16 months at the moment. Let me know. Thanks.

[mcrlmn]

"if I open a store, is there any benefit regarding to tax return?"

At this stage of the game, there's nothing to see here... So nope.

Read the advice members have provided.
You're reading too much into things and creating all sorts of needless and unnecessary work and stress for yourself.
Relax and enjoy your hobby.

[hold.your.own.media]

In 2019 I had over $20k in sales on personal possessions (lots of DVDs and Blu-rays). Did this due to losing my job at the end of 2018 and was helpful. Anyways, since I was under the $30k (sales & shipping collected) threshold, I was not required to pay tax on the materials sold.

This year will be different however, as I'm likely going to hit the $30k mark in August. So I may need to incorporate etc. Doing this, I'd become a business owner, annnd therefore not eligible for EI (which I'm on currently after losing another job this past March).

[cumos55]

When you pay city taxes, that is like paying rent....    This amount based on how much of your residence is used for storage of inventory, and for working on selling,  is tax deductible if you are selling items that are not your personal items..... 

If you are selling personal items,  sales are not taxable, unless it is capital gains or a combination of capital gains minus capital losses.

Selling your own personal items  is like having a garage sale with personal items...  Sales are not taxable unless capital gains are a reality.  If you have a capital gain,  costs  only associated with the sale of this item with the capital gain are deductible  to the point that a capital gain is reduced to a value of $1000, below which a capital gain is no longer taxable.

If a capital gain is still over $1000 after costs are deducted, then a taxable amount is present as a capital gain.

[ypdc_dennis]

You do not need to incorporate to collect GST/HST.  You incorporate for other reasons.

Owning a business does not mean you are not eligible for EI (but it can get more complicated).

-..-

[hold.your.own.media]

I'm not talking about collecting GST, someone else was... If you go over $30k in deposits in a calendar year from sales, even if its all personal possessions (sales & shipping collected from buyers) you need to incorporate and include as revenue when filing taxes.

[hold.your.own.media]

Not entirely true. Taken from another post within the eBay community: "You are selling used personal property with no goal to generate a profit.  In such instances, you do NOT need to report sales to CRA unless your worldwide annual sales exceed $30,000 (you need to register for HST/GST) or an item (or group of items) is sold for more than $1,000 (may be subject to capital gain on sale of personal property)."

For myself, I didn't sell any single listing for more than $1,000, but am up to nearly $10k profit from this year's listings.

Also FYI for those approaching $30k: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/when-regis.... So in order to start charging for taxes, I thought you would need to incorporate, even if you're selling off personal belongings. If you can just collect the tax once going beyond that point, the report it when doing taxes, that's not too bad as I wouldn't want to incorporate unless I HAD to.

[femmefan1946]

Dear Flying Spaghetti Monster, I miss @pierrelebel  when these complicated questions come up. Ramen.

Free advice is worth every penny you pay for it. Free online advice is worth twice that.

You both need to talk to a tax accountant. I agree you are probably worrying for nothing.

Keep records of every cent you spend, including packaging materials, printer ink, and postage. You may not be making any money at all.

And that's my free advice.

[cumos55]

Learning about tax was achieved in part by reading,  and more reading of what Canada Revenue Agency (CRA) has in their website.

and then... There was  a seller here ....pierrelebel .... an eBay seller  who was a "tax expert''''.....

He confirmed everything that I read ....  and I learned what to do

It is most important for eBay sellers to visit that CRA website... and if still not sure what to do.... visit a local tax expert.....   Look for someone who understands selling online.

The most important part of filing that annual tax form is knowing what not to do.... and then know how to make it happen...