CRA vs eBay

[99goals]

Can someone explain this to me. I am not exactly sure how the "laws" work in Canada with respect to this.

If someone buys product from a hobby store and they pay taxes on that product, they cannot ask for tax on the singles they sell from buying a hobby box correct?

Or does this apply to business owners who do not charge tax on their products?

Is there an accountant on here who could explain this to me?

 

[Hama]

Can someone explain this to me. I am not exactly sure how the "laws" work in Canada with respect to this.

If someone buys product from a hobby store and they pay taxes on that product, they cannot ask for tax on the singles they sell from buying a hobby box correct?

Or does this apply to business owners who do not charge tax on their products?

Is there an accountant on here who could explain this to me?

As long as they are registered with the CRA with a GST registration number - they are permitted to charge the tax. Otherwise - forget it - the tax cannot be passed on directly without it.

 

[99goals]

Then how can they come after people who do not have a GST registration number? From what I see and can tell they are going after all powersellers and anyone who makes 1000 a month or more...

I just don't see how they can prosecute someone who resells stuff after they already pay tax on the product to begin with.

Or better yet, how do you prove its not income unless you save all the receipts of the products you buy.. or does it matter..

 

[Hama]

Then how can they come after people who do not have a GST registration number? From what I see and can tell they are going after all powersellers and anyone who makes 1000 a month or more...

I just don't see how they can prosecute someone who resells stuff after they already pay tax on the product to begin with.

Or better yet, how do you prove its not income unless you save all the receipts of the products you buy.. or does it matter..

To my knowledge, collectibles are Listed Personal Property - so any income derived from any sale of it is deemed to be income in the eyes of the CRA.

If there is a pattern of continued selling that can be established, and being a Power Seller would be that, it is possible to consider that as additional income. Much like waiters and other servers are supposed to be declaring their income from tips and gratuities - the government has to have its hand in everything. It's like a poker player, any money you make in a casino or a lottery is tax-free since it is deemed to be a windfall, but if it can be established that one makes a living or has a pattern of making consistent income from playing, they could theoretically be considered to be a professional - and earnings could be considered to be income.

I'm by no means a professional that deals with tax, or do I suggest I am an expert, but if you want a definitive answer, I would find someone who does have expertise in Canadian Tax Law

Your last thought is fairly subjective, depending on any particular person's interpretation - when you're talking about tax law, common sense doesn't necessarily prevail. Particularly if they're not knowledgeable about this hobby.

 

[99goals]

hmm you make things pretty clear for me with your last post. I think this will have a major impact on supply and demand in the end. Less sellers, less product with a world wide net like eBAy.

Thanks for your input.

 

[TanguayFan]

Isn't the CRA going after income tax as opposed to sales tax? In other words, they're chasing power sellers for the tax on the income they make, as opposed to the sales tax they may (or may not) have charged.

 

[Hama]

Isn't the CRA going after income tax as opposed to sales tax? In other words, they're chasing power sellers for the tax on the income they make, as opposed to the sales tax they may (or may not) have charged.

That is it in a nutshell Rob - given the amount of money that changes hands online - it's not surprising that they're trying to get their hands on ANY income they can justify.

 

[smekm]

Yep guys above have it right

Does anyone know anyone that has been affected by this sense they came out and said that they were going to give up everones info to CRA ?

 

[Hama]

Yep guys above have it right

Does anyone know anyone that has been affected by this sense they came out and said that they were going to give up everones info to CRA ?

The main thing that CRA has wanted to go after are the power sellers - since that is starting at least $12K/year per user.

But when CRA and the government have an opportunity to broaden the tax base - they will try to do so

 

[99goals]

the funny thing is that unless you make 35k a year extra, you don't need a gst number.. this will be interesting on how it plays out

 

[chadsexington]

The main thing that CRA has wanted to go after are the power sellers - since that is starting at least $12K/year per user.

That's not necessarily true anymore Art. This is going to make things even more complicated for the CRA, but Powersellers don't have to register 1K a month in sales anymore. If they attain a certain number of transactions per month, and their DSRs are high enough for a given period of time (I think this is 3 months as well, like PS eligibility,) they can qualify to be a Bronze PS.

What is the percentage of taxation requested by the CRA anyway? Is it lower or higher than capital gains tax? Considering profit margins for many eBay sellers is low to begin with, and they make their money off said margins, that could be scary in a hurry for lower tier sellers.

 

[bidds55]

As this whole nonsense applies to the hobby, if a tax court uses any common sense, the first hobby related tax case will quickly lead to CRA moving on. Given the slim margins most are operating on as Matt mentioned, and then factoring in deductions that would have to be allowed, since CRA would be accusing individuals of running a business, those individuals would quickly show a loss on paper, resulting in a net expense for CRA, with no additional tax dollars owing. Maybe there are other parts of ebay where this wouldn't be true, but I unless I completely misunderstand the deductions that are available to business, sellers would have to be allowed to deduct the cost of their computers, internet connections, shipping materials, ebay fees, paypal fees, and possibly even a portion of their housing costs, including heat, hydro, rent/mortgage interest. Once these things are all factored in, on top of the cost of acquiring the items they sell, I have to think even most lower, or mid level powersellers would be able to produce a loss for tax purposes.