Ebay Businessperson Convicted

On August 27, 2010, CRA announced that they had convicted an individual for failing to report business income from their business selling fur coats on eBay. CRA has targeted Canadian vendors on eBay as a potential group of taxpayers who have underreported their income. In 2008, the Federal Court of Appeal confirmed the Federal Court of Canadian’s decision which forced eBay to disclose the names of various eBay “Powersellers” from the 2004 and 2005 taxation years to the CRA. This particular taxpayer was prosecuted for failure to report income in the 2003 taxation year.

The distinction between when a vendor on eBay begins to earn business income is a question that can only be answered with an examination of the facts. However, the following factors are likely to be relevant to the determination of whether a vendor on eBay is involved in a business: the volume and regularity of transactions (higher volume and more regular volume indicating a business) and the diversity of the items being sold (with less diversity indicating a business).

If a vendor is unsure whether they have crossed the line from selling miscellaneous household items to engaging in a business, they should contact a lawyer and discuss their matter. If the vendor has indeed ‘crossed the line’ and has not been contacted by CRA, they may be able to take advantage of the voluntary disclosure process.