Side hustle or business: when Etsy, resale and craft income is taxable

Short answer: clearing out your own belongings on Facebook Marketplace is generally not income, and a loss on them is not deductible. Buying things to resell, or making goods and selling them regularly with an intention to profit, is a business: report the profit on Form T2125 with your return. Register for GST once your taxable sales pass CAD 30,000. Platforms that let people sell goods report information about their sellers to the CRA each year.

Selling your own things

Things you owned for personal use, such as clothes, furniture or a bike, are personal-use property. When you sell them, the cost and the selling price are each treated as at least CAD 1,000, so most household sales produce no gain to report. A gain above that is a capital gain you report. A loss on personal-use property usually cannot be deducted, because the CRA treats it as a personal expense.

When it becomes a business

An activity is a business when you carry it on for profit and there is evidence to support that intention. Where it has a personal side, as a craft or a collection often does, the CRA looks for a sufficiently commercial, businesslike way of working. No single factor decides it. The ones the CRA lists for creative work include:

• The time you spend on it
• Whether you promote and market what you sell
• The revenue it brings in, and how it has grown
• Your record of profits or losses over several years
• Whether the expenses relate to the activity
• Your training, qualifications and recognition

Buying stock at thrift stores to resell on eBay or Poshmark, or running an Etsy shop with listings, prices and regular sales, generally looks like a business. Selling a few things you no longer need generally does not.

If it is a business

• Report gross sales and expenses on Form T2125 with your T1 return
• Deduct materials, the cost of the stock you sold, platform and payment fees, shipping, packaging, and the business share of a home workspace
• Count your stock at year end, and work out the cost of goods sold
• Pay CPP on your net self-employment earnings
• Register for GST once taxable sales pass CAD 30,000 in four consecutive calendar quarters or in a single quarter
• For BC PST, a marketplace facilitator collects on the sales it facilitates of goods located in Canada; your own site and markets follow the small-seller test

The platforms report to the CRA

Under the reporting rules for digital platform operators, platforms that let sellers earn income by selling goods or providing services have to collect information on certain sellers, verify it and report it to the CRA once a year. Etsy, eBay and similar marketplaces are the kind of platform the rules are aimed at, so assume the CRA can see what you sold there.

Questions people ask

Who collects GST and PST on Etsy, Amazon and Shopify →

Cost of goods sold and inventory →

Deductible business expenses →

CPP when you are self-employed →

Starting an online store: what to register →