# Domain Name Sale CRA Tax Treatment and GST/HST



## RogueTrader (Feb 9, 2020)

So, lucky me, I sold a Domain, and now have to confront the tax implications.

I purchsed a Domain Name a couple of years ago, and now I have the opportunity to sell it for $75,000 CAD.
I don't want to add it to my tax bill, so what are my options?

I have a bunch of domains and will likely only sell 1 or less domains per year.
I currenty do not have any business entity, I am doing this as a personal individual.
Should I set up a corp to do the transaction?, or is that just not worth the future accounting/tax reporting bill.

I could use my wife to do the transaction, as she has low-part time income, which would lessen the Tax Bill.

How does the CRA treat Domain Name sales? Personal Income, Investment Income, Captial Gains?
Also, from what I have read, as the domain is a .com domain and sold to a Non-canadian entity, GST/HST collection is not necessary?

Any suggestions would be appreciated.
Thank You.


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## james4beach (Nov 15, 2012)

Here's an old thread you might want to look at: Is a website a property?

I'm not a tax expert so this is just an amateur guess. Since this is a large amount, you might want to see an actual tax expert to find out if you can treat this like a capital gain. It's possible it can be treated as a capital transaction.

As part of my self employment income, I have recorded similar transactions in the past (cost of domains vs selling domains or advertising revenue). I reported them on T2125
https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2125.html

Mine were smaller amounts. I just recorded revenue from things like advertising and domain transfers (in which case 75,000 would be the revenue). You can add expenses against that however, like the ISP services or domain registrar services. What ends up happening is that the net result of (income minus expenses) gets reported on your main tax filing as self-employment income.

I think you are correct that GST/HST collection is not necessary in this case, but you probably still have to register a GST number with the government and report the transaction with them as well in a GST filing, even though the amount would be $0 tax collected.


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## sags (May 15, 2010)

I had 35 domain names years ago and sold a few for a few hundred dollars each. 

I didn't report the income because as far as I knew a person couldn't claim the cost of domain registration or purchase.

The CRA considered domain names as a hobby unless it was actually a company doing business as a registrar or third party selling website.

Isn't there an earning level when a hobby becomes a business ?

The immediate thought comes to mind that if the CRA allowed deductions for domain name registrations, they would effectively be paying the cost of speculating on domain names.

Example....if I owed $3000 in taxes, I could register 300 domains at $10 each and reduce the taxes, while speculating selling some domains for a profit.

I would be interested in learning the right answer if anyone knows.


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## Eclectic12 (Oct 20, 2010)

RogueTrader said:


> ... I purchsed a Domain Name a couple of years ago, and now I have the opportunity to sell it for $75,000 CAD.
> I don't want to add it to my tax bill, so what are my options?


I don't think you have a choice ... I think you have to report is as income of some sort.

Your options are to use whatever applicable deductions and credits to reduce the taxes generated. For example, if it is a capital gain transaction, other capital losses will reduce/eliminate it. An RRSP contribution that is deducted from income will also help.




RogueTrader said:


> ... I could use my wife to do the transaction, as she has low-part time income, which would lessen the Tax Bill.


You bought it and sold it so I doubt you can report it as your wife's transaction. But I'm not a tax expert.


Cheers


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## AltaRed (Jun 8, 2009)

LOL..... sliding off transaction income to a lower income spouse, with the domain in his own name? That is classic tax evasion.

The OP is being rather naive. If he is in business, surely he should already know appropriate accounting. If you don't already have a CCPC, then you are a sole proprietorship.

If you are in the business of buying and selling domains, CRA may consider this business income rather than capital transactions. However, I would be inclined to claim it as a capital transaction because it isn't really recurring income. https://patentable.com/tax-implications-of-ip-rights-and-transactions/ and also https://taxpage.com/articles-and-tips/owner-manager-taxation/purchase-price-for-domain/

There may be something in the CG guide that could be helpful https://www.canada.ca/en/revenue-ag...ns/publications/t4037/capital-gains-2016.html


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## james4beach (Nov 15, 2012)

The interesting thing here is that flipping domain names (or speculating in 'domain name' property) is generally not profitable. This might have been a thing 20 years ago, but these days it's extremely rare to have a big profit this way. Probably a one-off thing; I doubt it can be repeated.

At the end of the day you'd better report it somehow, and show a good faith effort to report the transaction.

Crypto currencies could be considered a parallel of this. They are also virtual properties that are purely electronic, so perhaps you should use the same approach to report the domain name; treating it like a commodity. Assuming that you are not a business, simply fill it out in Schedule 3 to calculate the capital gain.
https://www.advisor.ca/advisor-to-c...client/how-to-report-digital-currency-to-cra/

Calculate your numbers correctly and prepare all supporting evidence. Something tells me that the CRA may seek supporting documentation for this one.


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## sags (May 15, 2010)

If people can register domain names for speculation and be able to claim the expense, that would be an interesting scenario.


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