The Canada Revenue Agency recently reminded Canadians that the tax laws that apply to traditional commerce/trade also apply to electronic commerce. If you are a taxpayer who earns income through online commercial activity you must ensure that you are accurately reporting your income and meeting your tax obligations. The CRA will continue to vigorously enforce the tax laws to ensure that all Canadians pay their taxes.
According to the CRA, if you occasionally use the Internet to sell personal items, such as used furniture or sporting equipment, you would not normally have to report this on your tax return. However, if you regularly use the Internet or electronic boards to make a profit, then you must report your earnings on your tax return.
The CRA has found that in some cases, the seller listed on an electronic boards is actually a business or could be considered a business for tax purposes. Business income includes income from any activity you do for profit or that has a reasonable expectation of profit. Online businesses must comply with the tax rules that apply to any business operating in Canada.
Some of the requirements for businesses operating online are:
* filing tax returns;
* registering the business and its accounts;
* collecting and remitting Goods and Services Tax/Harmonized Sales Tax; and
* keeping records of business activities.