Here's how it actually works.
Etsy as a Marketplace Facilitator
Just like Amazon, Etsy is classified as a marketplace facilitator in Canada. This means Etsy is required by law to collect and remit GST/HST on sales made through their platform to Canadian buyers.
What this means in practice:
- Etsy collects GST/HST from the buyer at checkout
- Etsy remits the GST/HST directly to CRA
- You, the seller, receive your payment minus Etsy's fees, but the tax goes straight to the government
This happens regardless of whether you're personally registered for GST/HST or not. Etsy handles it automatically.
Do You Still Need to Register for Gst/hst?
Yes, in most cases. Here's why:
The $30,000 Threshold
If your total worldwide taxable revenue exceeds $30,000 in four consecutive calendar quarters (or in a single quarter), you're legally required to register for GST/HST with CRA. This threshold includes ALL your revenue, not just Etsy. If you sell on Etsy, at craft fairs, through your own website, or on any other platform, it all counts.
Voluntary Registration (Even Under $30,000)
Even if you're under $30,000, you might want to register voluntarily. Why? Because registration lets you claim input tax credits (ITCs) on the GST/HST you pay on your business expenses:
- Craft supplies and raw materials
- Shipping supplies and postage
- Etsy fees (the GST/HST portion)
- Software, tools, and equipment
- Home office expenses (the GST/HST portion)
If you're spending $10,000/year on supplies in a province with 13% HST, that's $1,300 in GST/HST you're paying. With registration, you can claim that back. Without registration, you're eating that cost.
What Changes When You're Registered
If You're Not Registered for Gst/hst
- Etsy collects and remits all GST/HST on your Canadian sales
- You don't file GST/HST returns
- You can't claim ITCs on business expenses
- Simpler, but potentially more expensive
If You Are Registered for Gst/hst
- Etsy still collects GST/HST on sales to Canadian buyers (as marketplace facilitator)
- You must file GST/HST returns (quarterly or annually)
- You CAN claim ITCs on business expenses
- You need to correctly report the marketplace facilitator amounts on your return
- For sales outside Etsy (your own website, craft fairs), YOU collect and remit GST/HST directly
The Reporting Trap: Don't Double-count
This is where Etsy sellers mess up on their GST/HST returns.
If you're registered:
- Don't report Etsy-facilitated sales as your own collected GST/HST. Etsy already collected and remitted it. If you also report it on your return as tax you collected, CRA will think you owe it again.
- Do report your total sales. But clearly separate the marketplace-facilitated portion from any direct sales where you collected the tax yourself.
- Do claim your ITCs. The GST/HST on your supplies, fees, and expenses is yours to claim regardless of who collected the sales tax.
Etsy Fees and Gst/hst
Etsy charges several fees, and GST/HST applies to most of them if you're in Canada:
- Listing fee: $0.20 USD per listing. GST/HST charged on the CAD equivalent. Yes.
- Transaction fee: 6.5% of sale price. GST/HST charged. Yes.
- Payment processing: 3% + $0.25. GST/HST charged. Yes.
- Offsite ads (if applicable): 15% of sale (or 12% over $10K). GST/HST charged. Yes.
If you're registered for GST/HST, you can claim ITCs on the GST/HST portion of all these fees. Over a year, this adds up, especially the transaction fee on higher-volume shops.
Selling to US and International Buyers
For sales to buyers outside Canada:
- No Canadian GST/HST applies (these are zero-rated exports)
- The buyer's country may have its own import duties or taxes, but that's their responsibility
- You still report these sales on your GST/HST return as zero-rated exports
- You can still claim ITCs on expenses related to making those products
This is actually another reason to register: if you sell internationally, your ITCs (from Canadian expenses) may exceed the GST/HST you owe (which is $0 on exports), resulting in a refund from CRA.
Quick Method vs. Regular Method
If you're a small Etsy shop, the GST/HST Quick Method might save you money. Instead of tracking every ITC, you remit a flat percentage of your revenue (typically 3.6% for service-based or 1.8% for goods in some provinces). This is simpler and often results in keeping more of the GST/HST collected.
Whether the Quick Method is better depends on y