Is there anything better than a Saturday morning market in the Okanagan? The sun is out, your stall looks amazing, and you’re chatting with people who are genuinely excited about what you do. It doesn’t matter if you’re selling juicy peaches in Keremeos, unique pottery in Penticton, or handmade jewelry from your Kelowna studio—you’re making it happen.
But then, a quiet thought creeps in… taxes.
Suddenly, the thrill of a cash sale or a Shopify cha-ching gets a little clouded by dread. How are you supposed to track all of this? What can you actually write off? And wait, are the taxes different if you sell online versus in person? It’s enough to make your head spin.
Okay, take a deep breath. You can totally do this. Think of this guide as your personal roadmap, made just for creative folks and producers right here in the Okanagan and Similkameen valleys. Let’s walk through it, one step at a time.
First Things First: Are You a Hobby or a Business in the CRA’s Eyes?
Before we get into the weeds, let’s tackle a big one. You might call your venture a ‘side hustle,’ but the Canada Revenue Agency (CRA) has a slightly different take. They’re looking for what they call a “reasonable expectation of profit.”
What does that mean in plain English? Basically, are you actually trying to make money? If you’re operating like a business—you have a plan (even a simple one), you keep records, you’re trying to grow—then the CRA almost certainly sees you as a business. If you’re just knitting a few scarves and selling them to your friends for fun now and then, it’s probably a hobby.
For pretty much every market vendor and online seller out there, the goal is profit. So, your best bet is to operate like a business right from day one. And honestly, this is great news! Why? Because it means you can start deducting your expenses.
Juggling Market Sales & E-commerce? Here’s How It Impacts Your Taxes.
Your business is a hybrid, and that’s awesome. You’ve got cash and Square payments flying in at the farmers’ market, e-transfers from Instagram sales, and payouts landing from Etsy or Shopify. It feels like a lot of different streams to watch. The trick is to remember that they all flow into one big river: your total income.
Every single dollar you make selling your products counts as business income. It doesn’t matter if it’s a crumpled fiver, a credit card tap, or a direct deposit. Your mission is to keep track of it all. Good bookkeeping isn’t just about being tidy; it’s your absolute best defense against the stress of tax season.
All this info—your total sales minus your total expenses—gets reported on a form called the T2125, Statement of Business or Professional Activities. You’ll file this handy form right along with your personal tax return.
The Big Question: Do You Need to Register for GST/PST in BC?
This is where most people get tripped up, but I promise the rules are more straightforward than they seem.
Goods and Services Tax (GST): This is the 5% federal tax. The government considers you a “small supplier,” which means you do not have to register for, collect, or send in GST/HST as long as your total sales across the globe are $30,000 or less in a one-year period. Once you’re about to cross that $30,000 line, it’s time to register for a GST number.
Provincial Sales Tax (PST): This is our 7% BC-specific tax, and the rules are a bit different. In BC, you generally need to register to collect PST if you’re selling taxable goods here in the province. Here’s the kicker: unlike GST, there’s often no minimum sales amount you have to hit. If you sell things like soap, art, clothing, or pottery to customers in BC (whether you’re at a market or selling online), you probably need to register for PST from your very first sale. Some things, like most basic groceries, are exempt.
- The simple takeaway: If you’re making less than $30k a year, you can probably forget about GST for now. But, if you’re selling taxable goods to anyone in BC, you almost certainly need to be on top of PST.
Your Secret Weapon: A Complete List of Deductible Expenses for Market Vendors
Think of every dollar you spend on your business as an investment in your dream. The best part? You get to deduct these legitimate expenses from your income, which directly lowers the amount of tax you owe. Here are the usual suspects for vendors like you.
For Your Market Setup
- Stall & Market Fees: The cash you hand over to rent your spot at the Kelowna Farmers’ Market, Penticton Market, or any other event.
- Equipment: Your tent, tables, signs, and all the cool displays you use to make your booth pop.
- Payment Processing Fees: Those sneaky little percentages that Square, Stripe, or Shopify skim off every sale. They add up fast!
For Your Products
- Raw Materials: The flour for your baked goods, the wood for your signs, the fabric for your designs—all of it.
- Packaging: Boxes, bags, tissue paper, thank you notes, and shipping labels.
- Shipping Costs: What you pay Canada Post to get your awesome products to your online customers.
For Your Online Shop
- Platform Fees: Your monthly bill from Shopify or those listing fees from Etsy.
- Marketing & Advertising: Boosting a post on Facebook, running Google ads, or paying for a spot in an online marketplace.
- Website & Domain Costs: Hosting fees, your domain name, and any cool apps or plugins you buy for your site.
For Your Workspace
- Home Office: Got a dedicated space in your home where the magic happens? You can deduct a portion of your home expenses like heat, electricity, and even home insurance. The calculation is based on the size of your workspace compared to the total size of your home.
- Vehicle Expenses: Are you driving to the market, the post office, or the craft store for supplies? You can deduct the business portion of your vehicle costs. The best way to track this is with a mileage log. Seriously, just keep a notebook in your car or use an app. It’s a game-changer.
Your Year-End Tax Checklist: A Step-by-Step Guide for a Stress-Free Tax Season
Ready to pull it all together? Here’s your game plan.
- Gather All Your Income Records: Download the annual reports from Shopify, Etsy, and Square. Comb through your bank statements to find all those e-transfers and cash deposits from sales. Add it all up to get your total gross revenue.
- Tally Up Your Expenses: This is where keeping good records all year really pays off. Go through your business bank account, credit card statements, and that shoebox of receipts. Sort every expense into the categories we talked about (materials, marketing, fees, etc.).
- Calculate Your Vehicle & Home Office Use: Check your mileage log and figure out the percentage of your driving that was for business. Do the same math for your home office space. Apply those percentages to your total vehicle and home costs for the year.
- Reconcile Your GST/PST Collected (If applicable): If you’re registered, double-check that the sales tax you brought in matches what’s on your sales reports. You’ll need this for your filings.
- Choose Your Filing Method: You can definitely use DIY tax software; it will walk you through filling out the T2125 form. Or, you can team up with a pro. An accountant can often find deductions you didn’t even know existed and give you the confidence that everything has been filed perfectly.
Feeling Stuck? Local Resources for Okanagan & Similkameen Entrepreneurs
Remember, you’re not in this alone. Our region has an incredible support system for small businesses.
- Small Business BC: A goldmine of a provincial resource with webinars, mentors, and checklists for everything from taxes to marketing.
- Community Futures Okanagan Similkameen: They offer business loans, coaching, and support programs right in our backyard.
- Local Chambers of Commerce: Your local chamber in Kelowna, Penticton, or Vernon is an amazing way to connect with other entrepreneurs who get it.
Running your own business is a journey fueled by passion. While this checklist gives you a solid game plan for your taxes, every creative business is unique. To make sure you’re claiming every single deduction you’re entitled to and setting yourself up for success down the road, getting advice tailored specifically to you is one of the smartest moves you can make. If you’re ready for clear, personalized guidance from a team that gets it, we’d love for you to get in touch with our team.
Frequently Asked Questions (FAQs)
Q: I use a Square reader at the market and have a Shopify store. How do I combine income from both for my tax return?
A: Easy peasy! You just add them all together. Your total business income for the year is simply your Shopify sales + your Square sales + any cash or e-transfer sales. You report that one big number on your T2125 form.
Q: Can I claim my mileage driving from Penticton to the Kelowna Farmers’ Market every Saturday?
A: You bet! Travel from your home (which includes your home office) to a work site like a market is a business trip. Just keep a log of the kilometres for each trip, and you can deduct the business portion of your vehicle expenses when you file.
Q: I bartered my handmade jewelry with another vendor for some local honey. Do I need to report that?
A: Yep, the CRA sees a barter as a sale. You need to report the fair market value of what you received (the honey) as income. The flip side is that the cost of what you gave away (your jewelry) is a deductible expense.
Q: What’s the real difference between GST and PST for my products, and when do I charge them?
A: Think of it like this: GST is the 5% federal tax that applies pretty much everywhere in Canada. PST is the 7% BC provincial tax that you only charge to customers in BC. If you’re a small supplier (making under $30k), you probably don’t have to deal with GST, but you will almost certainly need to collect PST on your sales to BC customers from the get-go.
Q: I sold something to a customer in Alberta from my Etsy shop. Do I charge them BC PST?
A: Nope! BC PST is only for sales to customers with a BC address. You don’t charge BC PST on items that you ship to another province or out of the country.