# Charging HST (sales tax) on used goods (Second Hand) , no profit



## tmpr (Feb 4, 2017)

I'm wondering about how sales taxes might work
on reselling used goods.

What if you buy a used item from a non-HST collecting
person for $99, fix it up (but with no more expenses involved) and then resell it for $100.
Canada revenue agency would expect you to pay 5% to 14% ($5 - $14) on the $100, even though you only made $1.00.
By that logic, you could even sell the item for less than $99, lose money, and yet still owe taxes.

If you were to continuously buy and then resell used goods, is there some sort of way to claim ITC tax credit against the price that you paid for the item? 
The only thing I could find addressing this is some old looking website {Apparently I can posted links} that seems to claim that 7/107th ( ~ 6.5% ) of the price that the used good was bought for can be claimed as a " a notional input tax credit".


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## kcowan (Jul 1, 2010)

If you are in an HST applicable business, you claim HST input credits. Whether the seller remits HST is not your business. So you only claim HST on your contribution to the sale.


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## tmpr (Feb 4, 2017)

kcowan said:


> If you are in an HST applicable business, you claim HST input credits. Whether the seller remits HST is not your business. So you only claim HST on your contribution to the sale.


Just to be clear, You can claim HST input credits on items bought from regular people?
Say I bought used gym equipment from people on craiglist, then resold them in bulk to gym's and schools,

Then I could claim HST Input credit on the price of the equipment I bought?

So If I bought a dumbbell for $100, resold it to a gym for $101 + tax 
then I'd owe ($101 * HST rate) - ($100 * HST rate [Input tax credit]) in sales tax?


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## OhGreatGuru (May 24, 2009)

You can't very well claim HST input if you didn't pay any HST on the purchase. The person who sold you the used item was likely not required to charge HST either because they had no "expectation of profit" or, even if they were in the business of selling used goods, were below the $30K threshold for charging HST. You can't make up an imaginary HST input - you have to have receipts for it. 

If you are planning to do this as a business, then the example you have supplied is an unprofitable business model.


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## Spudd (Oct 11, 2011)

You don't have to charge HST on it if you make less than 30k/year in sales.


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## kcowan (Jul 1, 2010)

So there are four situations that could apply:
1. No HST because both buyer and seller make less that $30k a year - cannot claim input credit
2. HST input credit and you make less than $30k - cannot claim
3. Less than $30k seller and you charge HST - cannot claim
4. Both seller and buyer are above $30k/yr and claim input credit.
In the last case, both seller and buyer will have an HST number.


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## Spudd (Oct 11, 2011)

I'm not sure about kcowan's point #3, as the seller it seems to me that if you are registered with an HST number and you charge HST, you can claim the input tax credits since you need to file an HST return if you have a number registered. But I'm not an expert.

The other thing I thought of is that if you do register for an HST number you can opt to use the quick method, which means you charge full HST on all your sales and then you can claim back a portion of it. 

Also, in re-reading your initial post I am confused about how you think this works. So let's say you buy something for $99 from Joe on Kijiji. You sell it for $100 to Frank. You have made $1 in profit. You would claim that $1 as income on your income taxes, and you would pay tax on that $1. That's assuming you didn't charge Frank any HST. If you did charge HST to Frank (because you are doing over 30k in sales a year), then Frank would pay $113 for the item, not $100. You have now pocketed $113, and then you need to pay that $13 in HST forward to the government. If Frank paid $100 including HST, then you no longer have a profit on the item, now you have a loss. You can claim that as a business loss on your taxes, but you still need to forward the HST to the government. But you'd be silly to charge less for the item than you bought it for, unless you made a huge mistake on the initial buy and now you realize the only way to get rid of it is to take a loss.


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## Joe Black (Aug 3, 2015)

tmpr said:


> Canada revenue agency would expect you to pay 5% to 14% ($5 - $14) on the $100, even though you only made $1.00.
> By that logic, you could even sell the item for less than $99, lose money, and yet still owe taxes.


It's this part of the OP's theory that doesn't make sense. He was supposed to collect $14 tax on the government's behalf, and the buyer would have paid a total of $114, i.e. $100 for the sale and $14 for the tax. The money you "loose" is what you were supposed to collect for the government but didn't.


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