| Discussion Forum: Thread 340612 |
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| | | Author: | BrickMerchant87  | | Posted: | May 31, 2023 08:14 | | Subject: | Other Canadian Sellers please help | | Viewed: | 108 times | | Topic: | Taxes | |
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| Hi
I have some questions regarding income taxes for canadian sellers
Question #1
I am very concern with calculating my cost of goods for the T2125 Statement sheet
Do i put my year end closing inventory value from my bricklink store inventory
onto sheet T2125
Question #2
Does anybody use cash accounting for your bricklink store bookkeeping and did
you have any issues with canadian tax accountants wanting you to use accrual
accounting method instead
Question #3
For people who use accrual accounting
How do you manage your bricklink inventory for your books/tax accounting purposes
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| | | | | Author: | BrickMerchant87 | | Posted: | May 31, 2023 08:21 | | Subject: | Re: Other Canadian Sellers please help | | Viewed: | 32 times | | Topic: | Taxes | |
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| Question #4
If you sell items parts/sets from your personal collection (no receipts) how
would that impact your inventory management for taxes?
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| | | | | Author: | Emporiosa | | Posted: | May 31, 2023 10:45 | | Subject: | Re: Other Canadian Sellers please help | | Viewed: | 46 times | | Topic: | Taxes | |
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| In Taxes, Brickseller87 writes:
| | Hi
I have some questions regarding income taxes for canadian sellers
Question #1
I am very concern with calculating my cost of goods for the T2125 Statement sheet
Do i put my year end closing inventory value from my bricklink store inventory
onto sheet T2125
Question #2
Does anybody use cash accounting for your bricklink store bookkeeping and did
you have any issues with canadian tax accountants wanting you to use accrual
accounting method instead
Question #3
For people who use accrual accounting
How do you manage your bricklink inventory for your books/tax accounting purposes
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(I am not an tax expert and am not providing professional advice. Simply my own
advice based on experience, from working with the CRA and my own accounting help).
I'll try to answer all questions in one answer; and it's based on accrual
accounting method (which is required with the CRA for this type of business).
Because of the nature of selling bricks/figs of LEGO, the CRA's stance is
that we can use the Weighted Cost Average (WCA) method for calculating your Cost
of Goods Sold (COGS). If you're selling only sets where the precise amount
that you paid is easier to track, then you can opt to do FIFO/LIFO.
The T2125 will ask for a few things, such as your opening inv, your purchases
during the year, and the end inventory.
Purchases during the year:
Your total amount you spent (including tax) for everything you bought that is
inventory. If you are registered with the CRA for GST/HST and claim your Input
Tax Credits (ITCs), then you exclude the taxes from this amount.
If you opt to use the WCA average, what you need to track then is the total numbers
of parts/items in all of the sets you bought, and divide the total cost by the
total number of items. Say you bought 100 sets that equalled $10000, and they
had a total of 100K parts and figs. That means each part/fig has a cost of $0.10
using the WCA. You need this for your Opening and Closing Inventory calculations.
Closing Inventory:
We take the example that you bought 100K total parts/figs last year from those
sets that you parted out. At the end of the year, you need to do an inventory
of what is still left. Say you have 80K parts left, meaning you sold 20K. Your
closing inventory (Part 3D line 8500 in the T2125) = $8000 (80K x $0.10).
COGS (line 8518) will now be Opening Inventory ($0 for the year you start) +
Purchases ($10K) - Closing Inventory ($8K) = $2K. Which is the 20k parts x $0.10.
Opening Inventory:
When you end the year in this example, you still had $8K worth of inventory,
so the following year, your opening inventory will be this amount.
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For the question about your personal collection, this is where it gets messy.
Anything you don't have a receipt for, you can't claim. It's as simple
as that. I've lost out on thousands of $ of claims because of not having
receipts. Typically selling your own items is outside of what the CRA needs you
to claim on your income taxes, but when it overlaps like this, you'll have
a tougher time proving to them that you're eligible to exclude it - especially
if it's something you bought after you started your business.
There's a fantastic free resource from the CRA and it's confidential
(they don't share with the rest of the CRA). Liaison Officers can help you
get setup properly and quickly. https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/liaison-officer-initiative-loi.html
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| | | | | | | Author: | SylvainLS | | Posted: | May 31, 2023 11:45 | | Subject: | Re: Other Canadian Sellers please help | | Viewed: | 27 times | | Topic: | Taxes | |
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| In Taxes, Emporiosa writes:
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There's a fantastic free resource from the CRA and it's confidential
(they don't share with the rest of the CRA).
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So, you don’t even have to start every question with “I’m asking for a friend”? 
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| | | | | | | Author: | BrickMerchant87 | | Posted: | May 31, 2023 13:16 | | Subject: | Re: Other Canadian Sellers please help | | Viewed: | 33 times | | Topic: | Taxes | |
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| Thank you so much for answering my question 
But i have one another question
Can i put the new and used loose parts from my personal collection and mixed
it in with the parts that i got for reselling
For example:
I have 20000 parts from my personal collection and 40000 parts from buying sets
to part out so its 60000 parts in total
I sold 20000 parts that is mixed with parts from my personal collection and parts
brought with the intent to resell (has receipts and everything)
My ending inventory ends up being 40000 parts mixed
Is it ok if i put the personal collection parts/brought to resell parts together
mixed on the T2125 ending inventory section
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| | | | | | | | | Author: | Emporiosa | | Posted: | May 31, 2023 18:43 | | Subject: | Re: Other Canadian Sellers please help | | Viewed: | 39 times | | Topic: | Taxes | |
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Is it ok if i put the personal collection parts/brought to resell parts together
mixed on the T2125 ending inventory section
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IMO, you'll need to report it all as income and you won't be able to
offset the costs of it if you don't have receipts for those personal collection
parts. It would be safer to sell your personal collection on another platform
that isn't mixed with an actual business, but you should run it by an expert.
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Canada, Ontario
France, Nouvelle-Aquitaine