Quick Answer
Canadian Etsy sellers owe income tax on all Etsy profits. Etsy collects and remits GST/HST on Canadian sales, but you're still responsible for registering if you cross $30,000 across all channels, claiming deductions, and filing Form T2125 with your T1 personal return by April 30.
Running an Etsy shop in Canada means two distinct tax obligations: income tax on your profits, and potential GST/HST compliance. Here's exactly what you need to know to stay onside with the CRA.
Income Tax on Etsy Revenue
All income from your Etsy shop is taxable business income in Canada. Report it on Form T2125 (Statement of Business or Professional Activities), which attaches to your T1 personal return. Etsy will issue you a 1099-K (for US tax purposes) but not a Canadian tax form — use your Etsy Finance reports for Canadian filing.
Deductible Expenses for Etsy Sellers
- Etsy listing fees ($0.20 USD per listing)
- Etsy transaction fees (6.5% of the sale price)
- Etsy Ads spend
- Materials and supplies for your products
- Shipping supplies and postage
- Home studio expenses (proportional)
- Photography equipment and props
- Packaging materials
Is Your Etsy Shop a Business or Hobby?
The CRA distinguishes between a business (income-motivated, run in a businesslike manner) and a hobby (primarily for pleasure). If you run your Etsy shop occasionally and don't make a profit, the CRA may deny your deductions on the grounds it's a hobby, not a business. Keep records showing your business intent.
Etsy's Finance Reports Are Your Canadian Tax Documents
Download your annual Finance summary from Etsy: go to Shop Manager → Finances → Finance Reports and download the annual CSV. This shows gross sales, Etsy fees, and tax collected. Use gross sales (before Etsy fees) as your revenue figure, and fees as deductible expenses.
MaxRefund Files Taxes for Canadian Etsy Sellers
We prepare T1 returns with T2125 for Canadian Etsy sellers, maximizing deductions and ensuring CRA compliance.
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