Etsy already collects and remits the GST/HST on your Canadian sales, which leads a lot of makers to the same wrong conclusion: "so I never need to deal with sales tax." If you sell on Etsy from Canada, the real picture is a little more interesting, and getting it wrong can cost you both ways.
What Etsy actually does
Like Amazon, Etsy is a marketplace facilitator in Canada. It collects GST/HST from the buyer at checkout and sends it straight to CRA. You get paid your amount minus fees, and the tax never passes through your hands. This happens whether or not you are personally registered.
So why register at all?
Two reasons. The first is the law: once your total revenue from every source, not just Etsy, crosses $30,000 over four consecutive quarters, registration is required. The second is money. Registration is what lets you claim input tax credits on the GST/HST you pay running the shop: raw materials, shipping supplies, the tax portion of your Etsy fees, software, a slice of your home office. Spend ten thousand a year on supplies in a 13 percent province and that is roughly $1,300 you either claim back or quietly eat.
If you sell a lot internationally, registering can actually put you in a refund position, because your export sales are zero-rated (no Canadian tax owed) while your Canadian expenses still carry recoverable GST.
The return mistake that makes you pay twice
Here is where registered Etsy sellers trip. On your GST/HST return, do not report the tax Etsy already collected as tax you collected. Etsy handled it. If you list it again as your own, CRA reads that as tax you still owe and asks for it. Report your total sales, but keep the Etsy-facilitated portion clearly separate from any direct sales (your own website, a craft fair) where you actually collected the tax yourself. Then claim your ITCs as normal.
A small shop tip
If your expenses are low relative to revenue, the GST/HST Quick Method can leave more money in your pocket than tracking every credit. If your material costs are high, the regular method with full ITC claims usually wins. It is worth running both once.
We laid out the fee-by-fee GST treatment, the export rules, and the return setup in full on our firm's site: Etsy GST/HST for Canadian Sellers: What You Need to Know.
If your Etsy tax setup feels murky, that is exactly the kind of thing we sort out for sellers, and we share the plain-English version in the newsletter.