Tax talk (1.Viewing)

Hey all!

I've looked around online quite a bit, and there does not seem to be any definitive guide on how to treat income earned via domain name sales at tax time.

So I'm curious to hear how other Canadians deal with it. Do you treat them as business income? Capital gains? Are new domain purchases expenses, investments, or assets?

Looking forward to some enlightening discussion!

I have so few sales and purchases that my accountant treats them as business income and new domains and renewals as expenses.

My domain sales revenue is treated as personal income.

Domain registration and renewal costs, and if I purchase domains, are treated as 'inventory' costs. Kind of like if you started a clothing shop, you'd have to buy a chunk of inventory the first year, and successive years you'd add more each year but also be selling each year. Then in your last year if you decided to close your business, you'd sell it all off or get rid of it and have zero costs if you bought nothing else that year. At least that's kind of how my accountant explains it.

I am wondering at what point it is best to incorporate a domain selling business, it depends on a lot of variables. Counting domain sales income as personal income has the benefit of being easy, as you don't have the costs of setting up a business and doing taxes like a business. The downside is if you're selling $xxx,xxx in domains per year, and have another full time job, you could be paying a lot in income tax. For every domain you sell, 30%, 40% or 50% could be going to taxes. If each year is variable, say some years low xx,xxx in sales, and other years higher, I just don't know what is best.