Sellers May Have Taxable Income from Online Sales

In Canada, income from selling goods on eBay, or similar platforms such as Kijiji, Etsy, or Amazon, can be taxable, depending on the nature and frequency of the sales. Here are the key factors to consider:

1. Business vs. Hobby: If you are selling goods occasionally, such as selling personal items that you no longer need, this is typically considered a hobby. Income from hobbies is generally not taxable. However, if you are buying items with the intention of reselling them at a profit, or if you are regularly selling goods on eBay, this activity may be considered a business by the Canada Revenue Agency (CRA).
2. Frequency and Profit Motive: If your sales are frequent and you are actively seeking to make a profit, the CRA is more likely to consider your activities as a business. This includes activities like purchasing items specifically to resell, maintaining an inventory, or using business-like strategies to increase sales.
3. Record Keeping: Regardless of whether your sales are considered a business or not, it's important to keep detailed records of all transactions. This includes the date of sale, description of the item, sale price, and expenses related to the sale (such as shipping costs).
4. Declaring Income: If your sales are deemed a business, you need to report this income on your tax return. You will need to complete a statement of business activities (Form T2125) and include it with your tax return. Business income is subject to income tax, and you may also need to remit GST/HST if your total taxable supplies exceed the small supplier threshold of $30,000 over four consecutive calendar quarters.
5. Expenses: If your eBay sales are considered a business, you can deduct reasonable business expenses from your income. This includes costs like eBay fees, PayPal fees, shipping supplies, and other expenses directly related to your sales activities.
6. Capital Gains: If you sell personal items occasionally, any gains might be considered capital gains. However, personal-use property is generally exempt from capital gains tax if the proceeds of disposition are $1,000 or less.

If you are unsure whether your eBay sales constitute a business or if you need to report this income, it's advisable to talk to our office. You can also refer to CRA guidelines for more detailed information.