Online Seller Taxes
How online sellers report sales, deduct inventory and fees, and when GST/HST registration starts.
The short version
- If you sell online regularly to make money (Etsy, Amazon, eBay, Shopify, Facebook Marketplace, Poshmark), the profit is business income, reported on form T2125. Clearing out your own closet at a loss isn't.
- You report gross sales and deduct your costs: the cost of what you sold, platform and payment fees, shipping, packaging, advertising and the business share of your phone, internet and home.
- Inventory isn't an expense when you buy it. You deduct the cost of the goods you actually sold, through cost of goods sold.
- GST/HST registration starts once taxable sales pass $30,000 over four consecutive calendar quarters. Sales shipped outside Canada are generally zero-rated but still count toward the $30,000.
- Since 2024, platforms report many sellers' earnings to CRA each year, and send you a copy by January 31.
Online Seller Taxes in Canada
Online selling has the friendliest start of any business. No store, no lease, a phone and a spare room full of boxes. The tax side is friendly too, as long as you treat it as a business from the start. Most online sellers who get into trouble don't cheat; they just don't keep track of what they paid for the stuff, and then pay tax on the whole sale price.
Is Your Online Selling a Business?
| What you're doing | Usually |
|---|---|
| Selling your own used belongings for less than you paid | Not income; nothing to report |
| Buying items to resell for more (thrift flipping, retail arbitrage, sneakers) | Business income |
| Selling things you make (crafts, art, baked goods, 3D prints) | Business income, if you sell regularly for profit |
| Print-on-demand, dropshipping, digital downloads | Business income |
| Amazon FBA or wholesale reselling | Business income |
| Selling a collectible or piece of art you owned personally for more than you paid | Possibly a capital gain, not business income |
The grey zone is the crafter who sells a bit and enjoys it; see hobby vs business. Personal-use property you sell at a loss isn't deductible, and a gain on personal-use items is calculated with a $1,000 minimum cost and selling price.
Is my online selling taxable, and how much?
Tell the assistant what you sell, where, your sales and costs. It tells you whether it's business income, what to deduct, the tax and CPP to set aside, and how close you are to the GST/HST threshold.
Working Out Your Profit
Online sellers report on form T2125. The key line most people get wrong is cost of goods sold:
| Example: a year of reselling | Amount |
|---|---|
| Gross sales (before platform fees) | $38,000 |
| Opening inventory (at cost) | $4,000 |
| Plus inventory bought during the year | $17,000 |
| Less closing inventory (at cost, counted at year-end) | ($6,000) |
| Cost of goods sold | $15,000 |
| Platform, payment and listing fees | $5,300 |
| Shipping and packaging | $3,900 |
| Phone, internet, software, ads (business share) | $1,600 |
| Net profit | $12,200 |
Count your inventory at the end of every year, even roughly. Without a closing count, you can't calculate cost of goods sold, and CRA's estimate won't be generous. Platforms report your gross sales, not your profit, so the burden of proving the costs is yours.
What You Can Deduct
- Platform costs: selling fees, listing fees, payment processing, subscription plans, fulfillment fees.
- Shipping: postage, labels, boxes, mailers, tape.
- Marketing: sponsored listings and ads; see advertising expenses.
- Sourcing trips: the business share of vehicle costs to buy stock or drop off parcels, with a mileage log.
- Workspace: a room used only for storage and packing may qualify for home office expenses.
- Equipment: a label printer, a camera, shelving, a computer, through capital cost allowance; see tools and equipment.
The general rules are on business expense deductions.
GST/HST for Online Sellers
You must register once your worldwide taxable sales (including zero-rated sales) pass $30,000 over four consecutive calendar quarters. After that:
- Sales to Canadians are charged GST or HST at the buyer's province rate, because goods are taxed where they're delivered.
- Goods exported to buyers outside Canada are generally zero-rated: 0% tax, but you still claim input tax credits on your costs.
- Amazon and similar marketplaces may collect GST/HST themselves on some sales by sellers who aren't registered, particularly for goods shipped from fulfillment warehouses in Canada. Once you register, collecting it becomes your job. Check your marketplace tax settings before and after you register.
Check your numbers with the GST/HST registration calculator and the rules on the small supplier rule. Setting up your store's tax settings is on GST/HST for online businesses.
Get your GST/HST set up right the first time
The GST/HST SmartFile runs both $30,000 tests on your sales, compares the quick method with the regular method, and fills in form GST74 if the quick method wins.
Selling to the United States
Many US states require out-of-state sellers to collect their sales tax once sales into that state pass a threshold, although big marketplaces like Amazon and Etsy usually collect it for you. That's US sales tax, not Canadian income tax, and the rules vary state by state; we don't cover them here. For Canadian income tax, US sales are converted to Canadian dollars and reported like any other sales.
CRA Sees the Platform Reports
Under the reporting rules for digital platform operators, marketplaces report sellers' identities and payments to CRA every year, starting with 2024. If those numbers don't match your T2125, expect a letter. If you've missed past years, see side hustle taxes and how to change a tax return.
Five Habits for Online Sellers
- Use one bank account and one card for the business.
- Download each platform's annual sales and fee report in January.
- Keep sourcing receipts, even from thrift stores and garage sales (write them yourself if needed: date, place, items, price).
- Count inventory at year-end.
- Set aside 25% to 35% of profit; see how much to save for taxes.
Return Check compares your T2125 with your platform statements before you file.
Online Selling Tax Questions
Do I have to pay tax on online sales in Canada?
If you sell regularly for profit, yes: the profit is business income reported on form T2125. Selling your own used belongings for less than you paid is generally not taxable.
Do I pay tax on my total sales or my profit?
On your profit. You report gross sales, then deduct the cost of goods sold, platform fees, shipping and other business expenses.
Does Etsy or Amazon report my sales to CRA?
Many platforms do. Since 2024, digital platform operators report sellers’ identities and payments to CRA each year and give sellers a copy by January 31.
When do online sellers have to register for GST/HST?
Once worldwide taxable sales, including zero-rated exports, pass $30,000 in a calendar quarter or over four consecutive calendar quarters.
Can I deduct inventory I bought but have not sold?
Not yet. Unsold inventory stays on hand at cost; you deduct it as cost of goods sold in the year you sell it.
Sources: CRA, Guide T4002; Reporting Rules for Digital Platforms; GST/HST for digital-economy businesses. Checked October 2026. The example is illustrative. Whether a marketplace collects GST/HST for a particular unregistered seller depends on how the goods are shipped and the operator's registration; we couldn't confirm one rule for every platform, so check yours. US sales tax is not covered.
Last reviewed October 4, 2026 against CRA and Government of Canada sources. How we check our facts.