Internet Business -


QUESTION: Dear David,

I would appreciate so much if you can let me know the tax implications of my eBay business - I started a eBay business selling electronic products. I am a Canadian citizen living in Vancouver. I have arrangement with my suppliers in China to ship the sold items directly from China to my customers all over the world. I do not keep inventory myself nor do I import any products. All I do is to sell on eBay on my home computer. I'm the owner of the eBay account. The proceeds are in US dollars, and is deposited into my bank account in the US, and is used to pay my supplier and other expenses such as eBay fees.

What do I do about tax? Is it a good setup? Please help me!!!

Thank you so much!

Sincerely,

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david ingram replies:

Your business is based in Vancouver and must be reported on line 135 of your Canadian T1 income Tax return.

The next problem or question involves the US where you are not physically working but apparently have a bank account where all expenses are paid from and where all money is deposited.

I wonder if you have rented a mail box or office identification spot and have a US address on your cheques and account.

If so, the appearance of a fixed base may be enough for the IRS to try and tax you and if it is based in Washington State, trhe "STATE of WASHINGTON" might want to assess a business tax for the business done in Washington Statebut it would only apply to sales made to Washington state Addrresses.

A mail box is not usually thought of as a fixed base but it would be better to pre-empt the US authorities.

I believe you should file a US 1040NR with schedule C and claim exemption from any US income tax under Article XIV of the US / Caanda Income Tax Convention (Treaty).  This gives the IRS the chance to see what is happening and challenge you now rather than later. 

You would then file your Canadian return and fill in form 2124 and put the results on line 135 of your return.

Because you live in Canada, neither your US 1040NR or your Canadian T1 is due until June 15th. 

If you need help, we would be glad to assist.

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david ingram wrote:
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Calls welcomed from 10 AM to 9 PM 7 days a week  Vancouver (LA) time -  (please do not fax or phone outside of those hours as this is a home office)
 
 
Disclaimer:  This question has been answered without detailed information or consultation and is to be regarded only as general comment.   Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consultation  in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
 
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David Ingram gives expert income tax & immigration help to non-resident Americans & Canadians from New York to California to Mexico  family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority.
 
Phone consultations are $400 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or a phone consultation is in Canada.
 
This is not intended to be definitive but in general I am quoting $800 to $2,800 for a dual country tax return.
 
$800 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
 
$1,000 would be the same with one rental
 
$1,200 would be the same with one business no rental
 
$1,200 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
 
$1,500 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits  no move in or out

$1,600 would be for two people with income from two countries

$2,800 would be all of the above and you moved in and out of the country.
 
This is just a guideline for US / Canadian returns
 
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $150.00 up.
 
With a Rental for $350
 
A Business for $350 - Rental and business likely $450
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
 
Moving in or out of the country or part year earnings in the US will ALWAYS be $800 and up.
 
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
 
8891 forms are generally $50.00 to $100.00 each.
 
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
 
Capital gains *sales)  are likely $50.00 for the first and $20.00 each after that.
 
Just a guideline not etched in stone. 
 
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