With spring flowers & April showers comes everyone’s least favourite time in their business: TAX SEASON! Amazon Sellers (and others selling online using sites like Etsy, Shopify, Squarespace etc) are generally considered self-employed in Canada, which means they need to report additional information at tax time.
As a self-employed/sole proprietor Amazon Seller in Canada, you are responsible for reporting both your income (from worldwide sales) and your eligible business expenses. How much you pay in taxes is based on your net taxable income (income – expenses) so maximizing what you claim can actually help reduce your tax bill!
Here are some of the most common tax deductions that Amazon Sellers will have in their business.
Please remember every tax situation is unique and you’ll want to connect with a tax pro for your individual situation.
1. Listing Fees
Every time you pay a fee to list an item, this becomes an expense to your business. You’ll want to download monthly/annual reports as this amount may vary by item. Also note: this fee is often charged in USD so you may need to convert to Canadian dollars for tax time reporting (as all info on your tax return has to be reported in CAD dollars).
2. Amazon Ads
If you are using Amazon Ads to sell your products in Canada, these become advertising expenses for your business.
3. Credit Card Processing Fees
If you are using Amazon Payments (or PayPal, Stripe, Square, etc) you’ll notice there’s usually a difference between the sale price of an item and what actually ends up in your bank account. That is because those payment processors charge a fee to handle the sales side of selling your item- often around 3% and/or a per item charge. Make sure to download these statements monthly/annually to keep track of the processing expenses.
This is a special category as it’s not considered a “direct expense”. Rather, inventory is recorded in a category we call “Cost of Goods Sold” or “Cost of Sales”. When you first purchase inventory (either to be resold or to be incorporated into an item for sale), it’s recorded as a purchased Asset. When you SELL it, then it moves from that ASSET category into an EXPENSE category called “Cost of Goods Sold” (or COGS, for short). We cover this in depth in our “Accounting 101 for Amazon Sellers” course, as it get can quite complicated if you’re not tracking things correctly.
5. Shipping Costs
If you are shipping products to your customers, make sure to keep track and claim this as a business expense.
6. Bank Charges
If you have a separate account to record income + expenses for your Amazon business, you may be able to claim bank fees like monthly activity fee, transfer fees, etc.
7. Vehicle Costs
If you are using a personal vehicle in your business (for things like deliveries, meetings, picking up supplies, etc) you may be able to claim the business-related portion of common expenses like fuel, insurance, parking etc. A mileage log is required; we do a full review of this in the “Accounting 101 for Amazon Sellers” course.
8. Photo Tools
If you are using a paid tool like Canva Pro or Adobe Photoshop to create your product images, this becomes an expense to your business.
9. Accounting Fees
If you are hiring an accountant to prepare things like your GST/HST return, self-employed income tax return, etc these become eligible expenses for your business.
10. Home Office/Studio
If you have a dedicated space in your home for your Amazon Business, you may be able to claim the business portion of common expenses like rent, electricity, insurance, etc. This space must be exclusively used for business and as the primary place of business. Common examples include a home studio to make your goods, a den or office for your administrative tasks, etc. We cover the exact calculations you need for this often-missed deduction in our “Accounting 101 for Amazon Sellers” course.
So there you have it: 10 Useful Tax Deductions for Amazon Sellers in Canada. If you’re interested in learning more about finance & your Amazon business, check out our additional training resources on this site.
Money & taxes can feel overwhelming- but they don’t have to be! Focus on getting organized, use your awesome community to help guide you, and take every opportunity you can to learn & grow your business.
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