Canadian Tax Obligations As An Amazon Seller
By: The Casual Flipper
-GST/HST & Income Tax
1. Business Structure
There are 3 ways to structure your Amazon business. Sole proprietorship, Partnership &
90% of Amazon sellers starting out will go Sole Proprietorship which I am assuming you have as well.
This document is geared towards Sole Proprietorship sellers.
The benefits of this structure are appealing to sellers starting out. It’s low cost & fairly easy to
manage. If the business generates a loss, that loss can be applied to reduce income gained from
other sources. This means if you have a fulltime job, but also a side hustle amazon gig, you could
potentially reduce your taxable income. Sole proprietorships have a downside, however, in that the
proprietor is personally liable for all functions and debts of the business.
2. GST/HST & Income Tax
In Canada, the general rule of thumb is you don’t need to register for GST/HST until you generate
$30,000 in sales. This is true, but also a huge mistake for Amazon sellers. It’s free to register and you
should do it immediately. Essentially, you’ll start charging the customer tax so that you won’t be liable
for it. All the inventory you purchase will be tax-free as you’ll get it back when you remit your taxes
which you can do monthly, quarterly or annually. Definitely don’t do it annually, you’ll need this money.
Quarterly is great, but if you have the time I’d seriously consider monthly.
Here is how things will flow to simplify it.
1. You buy inventory & pay tax
2. You sell the item on Amazon; Amazon charges the customer tax and sends you it in the next
3. You record the amount collected either manually or with software
4. You send the amount you collected to the government
5. In the same form, you tell them how much you PAID in taxes on inventory
6. Subtract the collected from paid and that’s your amount owing or refund
(collected $200 paid $600 refund $200)
Now, with that being said. That’s GST/HST. Separate is the Income-tax.
As you’re being paid, that money counts as income and it’s wise to put 25% of each disbursement
aside as Income tax. Because you’re a sole proprietor it’s added to your overall income as an
individual. So, if you make $45,000 year at your regular job, and amazon pays you $20,000 you’ll be
taxed at $65,000.
Don’t panic though, as a small business you have a ton of options to offset the tax. This conversation
is best suited for your accountant.
Bookkeeping is an area many are behind. This is a real shame because good bookkeeping changes
everything. I was behind 8 months on my books, I decided enough of this, and did a deep dive into it.
I’ve made it a habit. It’s incredibly expensive to be behind on your bookkeeping and you increase the
chances of mistakes.
Filing your GST/HST is a form of bookkeeping and often a because you need your ducks in a row.
You have to accurately track how much tax you’re paying & also how much tax Amazon is disbursing
I strongly recommend using software that automatically pulls transactions from your bank. This
method will drastically reduce the risk of transactions being missed. They’ll usually have options to
“reconcile” your accounts which means you go through every transaction to make sure they
accurately add up to the balance currently in your account.
Once you get this setup, you can simply pull reports to find out your tax obligations. Filing your
GST/HST becomes a 15-minute process. Your accountant is excited to do your taxes because you
have everything organized well. Most programs will offer you help getting started for a fee, it’s well
worth it. Or even hire your accountant, just to get things running smoothly.
2 final tips
Track your km and gas. I use Microsoft’s app MileIQ. It automatically detects when I’m driving and
asks me to categorize it when complete, offering me Business or Personal. Additionally, I use fuelly to
track my car fuel economy, but when I fill up it allows me to take a photo of the receipt.
KEEP ALL RECEIPTS!
Find an app that will allow you to photograph them, and also store them in a safe place. Recently
Amazon lost a bunch of my product and asked for receipts to prove I purchased. They were months
old. Additionally, if the CRA comes knocking you’ll need them to silence them.
(I use Wave Accounting, which they also have an app to track receipts)
I hope this helps! Be well.
Here’s a link for the Podcast which I cover this topic.
The Casual Flipper – Chris