Hobby or Business? How Online Sales Are Taxed in Canada

Prepared by Toronto Tax & Accounting Solutions Inc. and reviewed by Behroz Rizvi, owner. This article provides general information and may not apply to every tax situation.

Whether your online sales are a hobby or a business depends on the facts, mainly whether you run the activity to make a profit and in a commercial way. If it is a business, you report the income and may deduct eligible expenses. If it is truly a personal hobby, the income is generally not taxed and the costs are not deductible.

What the CRA says

For social media income, the CRA says it will generally consider your activities to be business activities provided they are not a personal endeavour (tax tip for social media influencers). The same thinking applies to selling goods on Etsy, eBay and similar platforms.

The court test

The Supreme Court of Canada set out the approach in Stewart v. Canada, 2002 SCC 46. The first question is whether the activity is a personal endeavour or a commercial one. If you pursue it with an intention to make a profit and carry it on in a commercial way, it is generally treated as a source of business income. Factors the courts look at include:

• Your profit and loss experience in past years
• Your training and knowledge in the field
• Your intended course of action, such as pricing, marketing and plans
• Whether the activity is capable of showing a profit
• How much time and money you put into it

Signs of a business and signs of a hobby

No single sign decides the question, but these are typical indicators:

• Business: you buy goods to resell, price to make a profit, track your costs, use a separate bank account, advertise, sell regularly and invest time and money in growing it.
• Hobby: you do it mainly for enjoyment, sell the occasional item at or below cost, do not track results and have no plan to make a profit.

Why this matters more now

Platforms now report certain Canadian sellers to the CRA under the Reporting Rules for Digital Platform Operators. Being reported does not make you a business, and being below the reporting limit does not make you a hobbyist, but it means the CRA may have data to compare with your return. See our Etsy and eBay guides.

Business losses

If your online activity is a business and it loses money in a year, you can generally deduct the loss against other income, but the CRA may look closely at repeated losses. Keep a plan, your records and evidence that you are trying to make a profit.

GST/HST has its own rules

The GST/HST definition of business is not identical to the income tax test. The CRA’s GST/HST policy on the meaning of business notes that an activity carried on for profit will generally be a business for GST/HST purposes. Ask us if you are unsure, and see GST/HST on online sales.

Hobby or business questions

Can I call it a hobby if I earn very little?

Not just because the amount is small. The test is about your intention and how you run the activity, not only the size of the income.

Do I need to register a business?

You report business income whether or not you register anything. A business name registration is generally needed when you trade under a name other than your own, and it is a separate step from reporting income.

What should I keep to show it is a business?

Sales records, purchase invoices, a separate bank account, advertising records and a simple plan showing how you intend to make a profit.

How we can help

Toronto Tax & Accounting Solutions Inc. helps online sellers and creators work out how their activity is treated and prepares their returns, from our Scarborough office or entirely online. A self-employed return starts from $149.99 and monthly bookkeeping from $99, both before HST. See our page for online sellers and content creators or visit torontax.ca.

Related guides

• Tax and bookkeeping for online sellers and content creators
• Amazon seller taxes in Canada
• Etsy taxes in Canada
• eBay taxes in Canada
• YouTube taxes in Canada
• GST/HST on online sales
• Inventory and cost of goods sold

Official sources

• CRA: Are you a social media influencer?
• CRA: Reporting rules for digital platforms
• CRA: Meaning of the first part of the definition of business (GST/HST)
• Supreme Court of Canada: Stewart v. Canada, 2002 SCC 46

Last reviewed: November 8, 2026. This article is general information, not advice for a specific situation. Platform help pages are linked for platform-specific statements.