Are you a peer-to-peer seller? Here’s what you need to know
CRA SOURCE ARTICLE
What is a peer-to-peer sale?
A peer-to-peer (P2P) transaction involves the selling of goods from one person or party directly to another. You may be taking part in P2P selling if you are connecting with buyers through digital platforms like websites, online marketplaces or mobile applications (such as Etsy, eBay or Amazon).
Income tax implications
As a resident of Canada, you must report your income from all sources on your income tax return. This includes any income you earn inside and outside of Canada, whether through P2P or other transactions. If you paid foreign income tax, you could be eligible for a tax credit.
P2P sellers who are not resident in Canada are subject to Canadian income tax on most Canadian-sourced income paid or credited to them during the year unless all or part of that income is exempt under a tax treaty. More information on non-residents is available at Non-Residents and Income Tax.
It is important to maintain proper books and records, including:
a list of all earnings from P2P sales
details about when, how and where your sales were made
details of the business expenses you incurred for these sales, supported by invoices, receipts, or vouchers
This applies to the sales you make to buyers in Canada and other countries. Keeping records of all your purchases will ensure you can support the expenses you claim on your tax return. To learn what qualifies as an eligible business expense, go to business expenses.
GST/HST implications
If your online activities are not a personal endeavour, and your total taxable supplies are more than $30,000 over four calendar quarters you have to register for, collect and pay to the Canada Revenue Agency the goods and services tax / harmonized sales tax (GST/HST) for taxable supplies of goods and services that you make. You can get more details on GST/HST registration requirements at find out if you must register for a GST/HST account.
How to correct your tax affairs
If you did not report your income from P2P sales, you may have to pay penalties and interest in addition to the tax on the unreported income. By correcting your tax affairs voluntarily, you may avoid or reduce penalties and interest.
To correct your tax affairs (including corrections to GST/HST returns) and report income that you did not report in previous years, you may:
Submit an application through the Voluntary Disclosures Program. If accepted by the CRA, you will receive prosecution relief, and in some cases penalty relief and partial interest relief that you would have otherwise needed to pay.
More information
You can find more information on this topic at taxes and the platform economy.
New rules regarding e-commerce services provided by non-residents in Canada came into effect on July 1, 2021. More information is available at GST/HST for digital economy businesses.
You can learn more about tax obligations for reselling by visiting the links above or by scheduling a free consultation with us.