eBay Businesses

On April 10, 2010, the National Post printed an article regarding the tax implications regarding sales on eBay. The article examines the income tax implications that may occur if an individual is a very active seller on eBay. The main consequence highlighted by the article is that the eBay selling may be considered a business, and any profit from such sales would be included in income for the year. However, there are other important issues overlooked by this article.

The first issue regarding eBay sales is determining the cost of the goods sold. Although the taxpayer may be able to determine their revenue through sources such as PayPal, it may be difficult for that same taxpayer to determine the cost of purchasing their inventory. This is especially important if the sales are taxable as an adventure or concern in the nature of trade as inventory for an adventure or concern in the nature of trade must be valued at cost for income tax purposes.

Second, there may be GST implications if the selling is considered a business. Once the individual is no longer considered a small supplier (as defined in the Excise Tax Act), they will have to collect GST on sales to Canadian residents, file GST returns and remit the collected GST. Further, claims for input tax credits may be unavailable due to time restrictions found in the Excise Tax Act.