(NC) The sharing economy makes it easier for people or businesses to connect directly with others who can provide them with products and services they want.
Whether you’re renting out your cottage to help fund your retirement, driving for a ride-sharing company, or selling goods and services using online platforms or an app, there are plenty of opportunities to make money through the sharing economy. But be careful! This common new way of doing business comes with tax obligations.
What are your tax obligations in the sharing economy?
There are various tax implications to consider when income is earned through the sharing economy:
- Individuals and businesses are required to report income they earn by participating in the sharing economy on their tax returns.
- Earnings from renting out property are considered by the CRA to be either rental income or business income, depending on the duration and the types of services included in the rental agreement. Both must be reported for tax purposes.
- If you earn more than $30,000 in gross revenue over 12 consecutive months or less, you need to register for a GST/HST account, then start collecting and sending GST/HST to the Canada Revenue Agency (CRA).
- If you are earning money from ride-sharing platforms or considering operating a taxi, you need to register for GST/HST regardless of your earnings – even if you earn less than $30,000 annually.
- If you earn less than $30,000, there are still advantages to registering voluntarily for a GST/HST account. If you do, you can claim input tax credits which can help you recover some of the GST/HST you paid.
Getting your reporting right can help you avoid interest and penalties later. Small business owners or self-employed individuals who need help understanding their tax obligations can ask for a free visit from a CRA Liaison Officer at: Canada.ca/cra-liaison-officer.
For more information about tax considerations when working in the sharing economy, visit Canada.ca/taxes-sharing-economy.
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