Imagine turning your Shopify side hustle into a strong Amazon business but then getting a CRA notice for unreported income. No Canadian e-commerce seller wants that. If you’re new, running things solo, freelancing with dropshipping, or going full-time, you need to understand peer-to-peer tax returns in Canada.
E-commerce is growing fast, with sales set to hit $104 billion by 2029. So, CRA reporting for online sales matters more than ever. It’s about staying safe from audits and penalties and keeping your earnings.
This 2025 guide breaks down CRA e-commerce reporting for online sellers. You’ll see what counts as P2P income, your tax duties, what triggers reports, and which forms (like T2125) you need. We’ll cover top deductions and common mistakes, too. The advice works for Shopify, Amazon, Etsy, and Facebook Marketplace. Stay with SAL Accounting to know how to file your taxes right and keep more of your online income.
Quick Takeaways:
Key Answers for Canadian E-Commerce Sellers
- Fair market value (FMV) sets the true market price for assets to avoid tax issues.
- Use market data or appraisals to calculate FMV accurately for CRA/IRS compliance.
- Selling below FMV risks higher taxes and audits from CRA or IRS.
- Save FMV proof like listings or reports to prevent penalties.
- FMV ensures fair pricing in buyouts and transfers, avoiding disputes.
What Is Peer to Peer Tax Return Income in E-Commerce?
Peer-to-peer (P2P) income comes from direct sales between individuals or small businesses on platforms like Shopify or Amazon, without big retailers involved. The CRA considers this taxable business income if your sales are regular and profit-driven. This is key for peer to peer tax returns.
Occasional personal sales don’t count. P2P is part of the “platform economy,” which also includes sharing services, gig work, and influencers, each with its tax rules. Here, we focus on e-commerce.
P2P on E-Commerce Platforms
If you sell on Shopify or Amazon as a third-party seller, your income qualifies as P2P. Shopify allows you to run your store, while Amazon provides a marketplace.
Other platforms like Etsy (handmade goods), eBay (auctions), and Facebook Marketplace (local sales) also contribute to Canada’s P2P economy, making up about 15-20% of total e-commerce.
- Taxable: Profits from regular product sales (e.g., Amazon).
- Non-taxable: Occasional sales of personal items.
Read more: “E-Commerce Taxes in Canada Made Simple: Types, Tips & Strategies”
Hobby or Business?
Not all P2P income is taxable. If selling is just a hobby or personal activity, you don’t need to report it. But if it shows business traits (like profit intent, frequent sales, or significant investment), the CRA treats it as self-employment income.
Note: Dropshipping lets suppliers manage stock and shipping, and the CRA taxes your profits as business income—don’t forget about cross-border import duties. Learn more about dropshipping taxes in Canada.
Your Tax Obligations as a Canadian Shopify or Amazon Seller
If you’re selling on Shopify or Amazon in Canada, you need to report all P2P income for both income tax and GST/HST. Don’t slip up—30–40% of small businesses do, leading to audits for a quarter of them. Even if you’re not a resident, you owe tax on Canadian earnings unless a treaty says otherwise. Check the CRA’s Non-Residents and Income Tax page to see where you stand.
Taxes You Need to Handle
- Income tax: Most sellers (70-80%) are sole proprietors, so their business income is treated as self-employment earnings.
- GST/HST: This includes a 5% federal rate plus provincial rates (up to 15%). Shopify calculates this for Canadian sellers, and Amazon provides detailed tax reports. Selling internationally? Claim federal foreign tax credits for taxes already paid abroad—calculate separately if totals exceed $200 for any country.
CRA 2025 Updates
Starting in 2025, platforms like Shopify and Amazon will report seller info if earnings exceed $2,800 CAD or there are 30 or more sales activities, based on OECD-aligned rules. This applies to 2024 income (first reports due Jan 31, 2025). It simplifies reporting but also increases scrutiny on your filings. This enhances online sales CRA reporting.
Read more: “Amazon Tax Guide for Canada and U.S.”
Cross-Border Tax Tips
For dropshipping, you’ll need to self-assess GST/HST on imports over $20 and cover duties (up to 18%). Don’t forget to claim input tax credits (ITCs) to offset these costs.
Pro Tip: Watch out for currency conversion errors—they’re an easy thing to miss but can impact compliance.
Triggers for Peer to Peer Tax Return Canada Reporting
Certain triggers mean you must report your peer-to-peer (P2P) income. About 40% of sellers hit these in their first year, often catching beginners by surprise.
Revenue Thresholds & GST/HST
Report all your income. If you make over $30,000 worldwide within four quarters, you’re required to register for GST/HST. Below this, registering is optional—but smart dropshippers sign up anyway to claim Input Tax Credits (ITCs).
Learn more: “GST/HST Return in Canada: A Guide for Businesses”
Business Structure Matters
Sole proprietors report earnings on their personal taxes. Incorporation lets you defer taxes but adds paperwork. Regular, repeated sales show business intent, which means reporting is a must. If you are not sure about your status, look at profit motive, your effort, or get a CRA ruling to be sure. Or you can just call our business incorporation experts for free.
| Trigger | Description | Example Impact |
| $30,000 Revenue | Global sales over four quarters | Mandatory registration; penalties if missed (1-10%) |
| Commercial Intent | Profit-driven activity | Side hustle becomes taxable business |
| Cross-Border | Imports > $20 | Dropshipping duties + GST/HST |
| Platform Data | Earnings > $2,800 CAD or 30+ sales activities (2025) | Auto-shared with CRA for audits |
Pro Tip: Track sales early; fines can reach 10% of unreported tax plus interest.
How to Report and Maximize Highest P2P Returns for P2P Income?
Filing taxes is simple with the right forms. Smart deductions can cut your taxes by 25-40%, but missing them could cost you $1,000-$5,000 a year. Stay organized by keeping detailed records regularly. Many platforms, like Etsy, provide summaries or forms (e.g., T4A for income over $500) to make tax prep easier.
Use Form T2125 Shopify Tax Reporting
If you’re a sole proprietor, you’ll file Form T2125 with your T1 tax return to report your business income. On this form, you’ll list your gross income, expenses, and net profit. Download the Form T2125 here.
For GST/HST, you’ll file using NETFILE or GST34, and the Quick Method can simplify things for smaller sellers.
| Revenue Level | Key Forms | Quick Notes |
| Any Amount (Business Income) | T2125 (with T1 return) | For sole proprietors: Report all sales and deduct expenses like fees and ads. |
| Over $30,000 (in 4 quarters) | T2125 + GST/HST returns (NETFILE or GST34) | Mandatory: Register for GST/HST, charge it on sales, claim credits on costs. Optional below threshold. |
| Platform Sales Over $2,800 | Use platform reports + above forms | Platforms (e.g., Shopify, Amazon) auto-report to CRA; match your filings to avoid audits. |
| Incorporated Business | T2 (corporate return) | For corporations: Separate filing; GST/HST rules apply if over $30,000. |
Steps to Report Shopify or Amazon Income:
- Download platform reports (e.g., Shopify or Amazon sales data).
- Calculate your net income by subtracting expenses from earnings.
- Submit your tax return by April 30 (or June 15 if self-employed).
- Talk to our Shopify tax experts or Amazon tax accountants if you face any problems.
Common Deductions for Highest P2P Returns
You can save big by claiming deductions for your selling expenses. These include platform fees, marketing expenses, inventory costs, and more. Here are some key categories to consider:
| Category | Examples | Savings Estimate |
| Fees | Shopify subs, Amazon FBA | 10-20% of costs |
| Marketing | Ads, SEO | Up to 30% income reduction |
| Operations | Shipping, packaging | ITCs on GST paid |
| Home/Office | Utilities (pro-rated) | $500-$2,000/year |
| Professional | QuickBooks, CPA | 100% deductible |
Pro Tip: If you’re into dropshipping, use drop-shipment certificates to transfer GST responsibility to your supplier. For sellers using platforms like Etsy or Facebook Marketplace, manually log your sales and expenses since these platforms often don’t auto-collect taxes.
Common Problems of E-Commerce Sellers & Their Solutions
Research shows 50-60% of sellers suffer from CRA ecommerce reporting, from audits (30% non-compliance) to underreporting (60% of cases).
- Audit worries: 25-30% of audits happen due to mismatched info. Use platform reports like Shopify or Amazon to stay accurate.
- Missed deductions: Missing deductions can cost you $1,000-$5,000 yearly. Tools like TaxJar can automate and save you 10-20 hours each year.
- Cross-border issues: Dropshippers pay 5-18% in duties. Claim Input Tax Credits (ITCs) to recover 20-30% of those costs. Or just ask our cross-border tax experts to handle it.
- Recordkeeping: CRA wants proper records, even for small side hustles. Keep digital copies of receipts and sales.
- Unreported income: Missed reporting? The CRA’s Voluntary Disclosures Program (VDP) can help fix mistakes and cut penalties. You can also amend your T1 or GST/HST returns.
A few smart habits and tools make handling these problems much easier.
Real-Life Tips from Sellers
Sellers often stress about 2025 reporting—like, “Is CRA tracking Shopify now?” Here’s how to make it easier:
- Join seller groups for advice and support.
- Ask a tax pro if you earn over $30K.
- Use QuickBooks for Shopify and TaxJar for HST in different provinces.
- Follow CRA’s tips: know your work type (P2P, gig), report all income, use platform docs, claim expenses, register GST/HST if needed, and fix mistakes early.
Stay organized, follow these tips, and reporting will be much simpler. You need to also learn more about Shopify taxes as a seller.
Conclusion
Getting your peer to peer tax return in Canada right for Shopify and Amazon might feel tough, but it really pays off. Make sure you report all your P2P income, register for GST/HST if you earn over $30,000, and use Form T2125 to claim your deductions for the best returns. Stay updated on changes for 2025 so you’re always prepared. When you focus on the basics and deal with things like audits ahead of time, you cut stress and keep more of your money—sometimes saving thousands.
If you need help, check the CRA website or talk to our e-commerce tax accountants. Start tracking your stuff now to boost your side hustle into real success. Questions? See the FAQ below or contact us for a free consultation!
FAQ: Common Questions on Online Sales CRA Reporting
Yes, if it’s business income, meaning regular and aimed at making a profit. Even small earnings must be reported. Underreporting can lead to audits.
This includes direct sales on platforms like Shopify or Amazon and dropshipping. The CRA taxes it as business income if it’s commercial, not casual.
Not at first. However, if your revenue goes over $30,000, you’ll need a BN for GST/HST. Beginners can apply sooner to claim credits.
Use form T2125 for sole proprietors and file it with your T1 return. Include sales reports and deductions. File by April 30 or June 15, depending on your situation.
Attach form T2125 (business activities) to your T1 return. For GST/HST, file through NETFILE.
Yes, you can. Business-related expenses are fully deductible and can reduce your taxable income by 25–40%. Keep all receipts for proof.
If your revenue exceeds $30,000, you must charge GST/HST on sales. Most platforms, like Shopify, have features to help automate this process.
If it’s regular and profit-motivated, the CRA considers it a business. Occasional personal sales may not require reporting.
