Do Canadian Etsy sellers have to report small amounts of income?

Yes — the CRA's peer-to-peer guidance directs platform sellers to report sales as self-employment income on Form T2125, with no minimum exemption for business income.

How do craft materials get deducted on the T2125?

Through cost of goods sold in Part 3D: purchases go on line 8320 and are adjusted by opening and closing inventory, so only materials in goods actually sold reduce the current year's income.

Do US sales count toward the $30,000 GST/HST threshold for Canadian sellers?

Generally yes. Exported goods are usually zero-rated, but zero-rated sales are still taxable supplies and count toward the small-supplier threshold.

Etsy & Online Seller Taxes in Canada

Quick answers

It's self-employment income. The CRA's peer-to-peer guidance names Etsy, eBay, Amazon and Kijiji specifically: report sales as self-employment income on Form T2125 — one T2125 per business you run.
Your materials aren't a simple expense. Wood, wool, beads, fabric — they flow through cost of goods sold, which adjusts for inventory still on the shelf at year end.
GST/HST: the normal rule — register once taxable sales pass $30,000 over four calendar quarters. Sales to buyers outside Canada still count toward that total.

What you report

Gross sales — before Etsy's fees come off — are your business income on the T2125. That includes sales to US and international buyers. If you sell on several platforms as one business, it's one T2125; genuinely separate businesses each file their own. The CRA also expects income from selling outside Canada to be reported, with a foreign tax credit available if another country taxed the same income.

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The seller deduction profile

The CRA's own peer-to-peer guidance lists platform costs, marketing, and raw materials as claimable. Where each lands on the T2125 (line names follow the CRA's T4002 guide — same canon as our T2125 line reference):

What you paid for	Where it goes	Worth knowing
Etsy/eBay/Amazon listing & transaction fees	8871 — Management and administration fees	The CRA explicitly lists platform costs as claimable; report gross sales, deduct the fees.
Raw materials (wood, wool, paint, beads, fabric)	Part 3 — cost of goods sold (purchases, line 8320)	Adjusted by opening and closing inventory — see below.
Etsy Ads, social media promotion	8521 — Advertising	The CRA lists marketing to drive traffic to your store as claimable when tied to earned income.
Shipping and postage	9275 — Delivery, freight and express	Packaging materials are supplies (8811).
Design software, shop tools subscriptions	8810 — Office expenses	The CRA's list includes software licences bought to earn the income.
Craft-fair table fees, seller memberships	8760 — Business taxes, licences and memberships	Market-stall and show fees fit here.
The room where you make things	T2125 Part 7	Home workshop follows the same business-use-of-home rules — calculated last, can't create a loss. See the Part 7 walkthrough.

The free expense tracker keeps all of this sorted by T2125 line through the year — and exports a tax-software-ready summary in February.

Cost of goods sold — the seller's special step

Unlike service freelancers, makers carry inventory. T2125 Part 3D works it out: opening inventory, plus what you bought during the year (line 8320), minus what's still unsold at year end — only goods that actually sold reduce this year's income. A $2,000 January yarn haul with half still on the shelf December 31 deducts roughly half this year, the rest when it sells. The full walkthrough is in our Part 3 income guide.

GST/HST for marketplace sellers

The threshold: registration becomes mandatory once worldwide taxable sales exceed $30,000 over four consecutive calendar quarters (CRA GST/HST Memorandum 2-2). The test is rolling — a strong Christmas season can tip it mid-year.
Exports still count: goods shipped to US buyers are generally zero-rated (you charge 0%), but zero-rated sales are still "taxable supplies" — they count toward your $30,000.
Platforms may collect tax on some sales: since July 1, 2021, the CRA's digital-economy rules can make marketplace operators responsible for GST/HST on certain sales facilitated for sellers. What Etsy or Amazon collects for you does not replace your own registration analysis once you cross the threshold — check your platform's tax documentation against your own numbers.
After registering: input tax credits come back on your materials, fees and tools.

Run your numbers through the GST/HST registration calculator; registered sellers should also check the quick method.

"It's just a hobby" doesn't survive a sales pattern. Regular listings, pricing for profit, and repeat customers look like a business to the CRA regardless of what you call it — and business treatment cuts both ways: income is taxable, but losses and expenses become claimable.

Keep the record trail

Platform statements, materials receipts, inventory counts at year end, and mileage to the post office all matter. The deadline calendar keeps the filing dates in view while you're busy making things.

Fill out my T2125 for me — free →

FAQ

Do I have to report my Etsy income if it's small?

Yes — the CRA's peer-to-peer guidance says to report income from platform sales as self-employment income on the T2125. There's no minimum below which business income is exempt from reporting.

Can I deduct the yarn/wood/beads I bought this year?

Through cost of goods sold — purchases go on line 8320 in Part 3D, adjusted by opening and closing inventory, so materials still unsold at year end deduct in a later year.

Do sales to American buyers count toward the $30,000 GST/HST threshold?

Generally yes. Exported goods are usually zero-rated (0% tax charged), but zero-rated sales are still taxable supplies and count toward the small-supplier test.

What industry code do I use on the T2125?

It depends on what you sell — the form asks for the code that best describes your main activity. A maker selling their own crafts and an eBay reseller land in different codes; browse the Statistics Canada NAICS 2022 index for your closest match.

Guides for other professions

Freelance developers · Photographers · Rideshare & delivery drivers · Gig platforms hub

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Estimates and general information only, for planning purposes — this does not constitute tax, legal or accounting advice, and your facts may change the answer. Consult a tax professional about your situation. Seller income-tax treatment and the claimable-expense examples were verified against the CRA's peer-to-peer platform economy guidance on July 5, 2026; GST/HST registration rules verified against CRA GST/HST Memorandum 2-2 and the zero-rating treatment against the CRA's export provisions the same day. T2125 line names follow the CRA T4002 guide.