Taxes for online sellers in Canada: income, GST/HST, records

Is your online selling a business?

For income tax purposes, the CRA describes a business as an activity with a reasonable expectation of profit, supported by evidence of that intention. Regularly buying or making products, listing them, shipping them and trying to grow sales points toward a business. Clearing out your own closet is a different situation, and our article on side-hustle taxes in Ontario covers the line between the two in more detail.

For GST/HST purposes the definition is wider: a business can include an activity whether or not it is carried on for profit. A shop that has run at a loss for two years can therefore still have sales-tax obligations. If your activity sits in a grey area, describe it to an accountant rather than choosing the label that gives the smaller bill.

Platforms report seller activity to the CRA

Under the CRA’s reporting rules for digital platforms, operators that are covered collect and report information about reportable sellers. That includes identifying details, such as your tax identification number (for most Canadians a social insurance number or business number), and activity details, such as the total amount paid or credited to you by calendar quarter. Your platform has to give you a copy of what it reported by January 31 each year.

Some sellers are excluded. For the sale of goods, a seller is excluded if there were fewer than 30 relevant activities and the total consideration did not exceed $2,800 for the year. If you do not give your platform your tax identification number, the CRA may charge a $500 penalty for each failure to provide it.

The practical point is simple. Treat the platform’s annual summary as a cross-check, not as your income figure. Your return should reflect all of your sales, including those made through your own website, in person and on other platforms.

Work out profit, not just payouts

A platform deposit is usually sales less fees, refunds and sometimes shipping labels. Your tax return starts from gross sales, with the fees and returns shown as separate items. Report your business income on Form T2125; a separate form is needed for each separate business. Sales include money received for goods and also goods or services received in exchange, such as a barter arrangement. Our article on payment processor payouts explains how to rebuild gross sales from a payout report.

If you buy or make goods for resale, you deduct the cost of the goods in the period you sell them, not the period you buy them. The CRA’s calculation uses opening inventory, purchases net of discounts, and closing inventory. Purchases of stock that is still on the shelf at year end are therefore not an expense yet; they sit in closing inventory.

Illustrative example with round numbers: you start the year with $1,000 of stock, buy $6,000 more and finish with $2,000 on hand. The cost of goods sold is $5,000. If sales were $12,000, gross profit is $7,000 before other expenses.

Count your stock and choose a valuation method

The CRA lets you value inventory either at fair market value for the whole inventory, or item by item at the lower of cost and fair market value. Once you choose, you use the method consistently, and this year’s opening figure must equal last year’s closing figure. Do an actual stock count at the end of the fiscal period unless you use a perpetual system with periodic counts and written records.

Most sole proprietors have a December 31 year end, which means a count around that date. Keep the count sheet with your records. Our article on the year-end inventory count walks through how to run one without disrupting sales.

Costs online sellers should track

As a rule, you can deduct reasonable current expenses you incur to earn income, entering only the business part. For a seller, that commonly includes delivery, freight and express charges, supplies, advertising, office expenses, and interest and bank charges. Record platform fees, payment-processing fees, packaging, shipping labels and returns separately instead of netting them against sales, so your books show what happened.

Equipment is treated differently. You cannot deduct the cost of capital property outright; you claim capital cost allowance instead. A camera, label printer or shelving unit may fall into that category. If you work from a spare room, see our guide to home office expenses for self-employed people for what the CRA looks at.

Keep a clear line between personal and business spending. Mixed purchases need a reasonable business-use portion and a note explaining it.

When GST/HST registration starts

A small supplier does not have to register. The test for most businesses is whether taxable sales exceed $30,000 over four consecutive calendar quarters. If you exceed that amount in a single calendar quarter, you must start charging GST/HST on the sale that took you over, and your registration date is no later than that sale. Sales from every channel count toward the total, not only one marketplace. You can choose to register voluntarily below the limit.

Registering lets you claim input tax credits on the GST/HST you pay for business purchases, such as inventory and packaging. It also means you collect tax and file returns. Use our GST/HST registration checker to test your own totals, and read the voluntary registration article before deciding.

Which rate to charge on goods you ship

For most sales of goods, the place of supply is the province where you deliver the goods to the buyer. If you mail them or send them by courier, it is the province they are sent to. A parcel from Ontario to a buyer in Nova Scotia is generally a Nova Scotia supply, taxed at that province’s HST rate of 14% since April 1, 2025. A parcel to a buyer in Ontario carries 13%, and the rate for a non-participating province is the 5% GST. Our article on charging GST/HST outside Ontario covers the rate rules in more depth.

Exports are different. Goods you supply in Canada and that are then exported can be zero-rated, but only under conditions, and you need satisfactory evidence of export if the CRA asks. Shipping to a buyer outside Canada is not automatically tax-free just because of the address. Check the conditions and keep the shipping records. Imports of the goods you buy for resale can carry their own GST/HST, so ask how your supplier’s invoices treat it.

Records, late filing and what to bring

Keep sales exports by platform, payout reports, supplier invoices, shipping receipts, the year-end stock count and each platform’s annual summary. If you have not reported all online income in earlier years, the CRA says you can change past returns or consider the Voluntary Disclosures Program, which can reduce or avoid penalties and interest in some situations. Eligibility depends on coming forward before the CRA contacts you.

Self-employed individuals generally file by June 15 and pay any balance by April 30 for the same year; the 2027 dates for 2026 income are on our deadlines guide. Sora’s bookkeeping and personal tax services can help you rebuild the year, and an accountant can confirm your own registration date and inventory treatment.