T2125 for Etsy and eBay Sellers in Canada: What to Report and How

Since January 1, 2024, digital platforms operating in Canada -- including Etsy, eBay, Facebook Marketplace, and Kijiji -- are required to report Canadian seller information directly to CRA. That means CRA already has your sales data. This guide covers what you need to report on T2125, which expenses you can deduct, and when you need to register for GST/HST.

CRA Platform Reporting: What Changed in 2024

Under rules that came into effect on January 1, 2024, platforms that facilitate sales of goods or services are required to collect seller information and report it annually to CRA. The reporting threshold is sellers with more than $1,000 CAD in proceeds and more than 3 completed transactions in a calendar year.

The platforms covered include Etsy, eBay, Facebook Marketplace, Kijiji, Airbnb, VRBO, Instacart, and similar services. The data CRA receives includes your name, address, taxpayer identification number, and total sales proceeds for the year.

This does not create a new tax obligation -- selling online was always taxable if it was business activity. What changed is CRA's visibility into that income. If you were not reporting it before, you are more likely to be caught now.

Business Income vs Personal Sales

Not all eBay or Kijiji sales are business income. Selling your old phone, clothes, or furniture is generally not a taxable event unless you sell for more than what you paid (in which case it may be a capital gain on personal-use property -- typically only reportable if the gain exceeds $1,000 for any single item).

Sales are business income when you have a profit motive and some regularity. CRA looks for:

• Buying goods with the intention to resell them at a higher price
• Making things and selling them for profit
• Selling repeatedly or continuously, not just clearing out old belongings
• Taking steps to grow or improve your sales operation

What Income to Report on T2125

Report your gross sales -- the total amount buyers paid -- on T2125 Part 2, line 8000. This is before Etsy deducts its fees. The fees come off later as expenses.

This is the same number platforms report to CRA, so your T2125 income should match what CRA received from the platform. If you net out fees before reporting, your number will be lower than what CRA expects to see, which can trigger a review.

If you sell on multiple platforms or through multiple channels (Etsy + craft fairs + Instagram), combine all sales into a single T2125. You file one T2125 per business, not one per platform.

Expenses You Can Deduct

All ordinary and necessary business expenses reduce your taxable income. Here are the most common for Etsy and eBay sellers:

T2125 Part 4: Cost of Goods Sold for Resellers

If you resell goods (buying and flipping), T2125 Part 4 tracks your Cost of Goods Sold separately from other expenses. You cannot simply deduct all your inventory purchases -- only the cost of what you actually sold during the year.

This requires a year-end inventory count. Count what you have not sold at December 31, value it at what you paid, and enter that as your closing inventory (line 8500). The formula -- opening inventory + purchases + direct costs -- closing inventory -- gives you your COGS, which is the deductible amount.

GST/HST for Online Sellers

The $30,000 GST/HST registration threshold applies to your total taxable sales across all channels, all platforms, and all businesses you run. It is a 12-month rolling calculation, not a calendar-year one.

If your combined Etsy + eBay + other sales hit $30,000 in any 12-month period, you must register for GST/HST within 29 days of crossing the threshold. After registration, you charge GST/HST on all sales to Canadian buyers and remit it to CRA.

Note that Etsy collects and remits Canadian GST/HST on sales to Canadian buyers on behalf of sellers in some circumstances. Once you register for GST/HST yourself, this arrangement changes -- you take responsibility for collecting and remitting. Review Etsy's current seller tax settings when you register.

Common Questions

Does CRA know about my Etsy and eBay sales?

Yes. Since January 1, 2024, platforms with Canadian sellers report your annual sales data to CRA if you exceed $1,000 in proceeds and 3 transactions. This applies to Etsy, eBay, Facebook Marketplace, and other digital marketplaces.

Do I report gross Etsy sales or what I received after fees?

Report gross sales on line 8000. Deduct Etsy fees as a business expense. This matches what CRA receives from Etsy and avoids the discrepancy of under-reported income.

I only sold personal items. Do I need T2125?

Not necessarily. Selling personal belongings at or below what you paid is generally not taxable. Selling for more than cost may be a capital gain. Selling regularly for profit is business income. The line is profit motive and regularity.

When do I need to register for GST/HST?

When total taxable sales from all sources exceed $30,000 in any rolling 12-month period. You have 29 days from crossing the threshold to register. Missing this deadline means CRA can assess the GST/HST you should have collected from the date you crossed.