Shopify Store Taxes in Canada 2025

Shopify Income and Canadian Taxes

All revenue from your Shopify store — including product sales, shipping charged to customers, and any service fees — is taxable self-employment income. You report it on Form T2125 with your T1 personal tax return. Shopify provides financial reports in your admin dashboard that make calculating your gross revenue straightforward.

HST/GST Setup for Shopify Stores

Once your annual taxable revenues hit $30,000, you must register for HST/GST. Shopify's tax settings allow you to configure HST collection by province automatically once you have your HST registration number. Set this up in Shopify Admin → Settings → Taxes.

Key provincial rates to configure:

Deductible Expenses for Shopify Sellers

• Cost of goods sold / inventory
• Shopify subscription fees (Basic, Shopify, Advanced)
• Shopify payments / transaction fees
• Shopify apps and plugins
• Shipping costs (postage, boxes, labels)
• Product photography and video
• Marketing and advertising (Meta Ads, Google Ads)
• Domain name and hosting (if separate from Shopify)
• Contractor fees (designers, copywriters, VA)
• Home office expenses (if operating from home)
• Accounting software and bookkeeping fees
• Returns and chargebacks (reduce gross revenue)

Inventory and COGS for Shopify

Track your inventory cost carefully. Shopify's inventory management can track units, but you need to maintain cost-of-goods data separately. At year end, do a physical count: Opening inventory + Purchases − Closing inventory = Cost of Goods Sold. This is your primary T2125 deduction.

International Sales from Shopify

If you sell to US or international customers, those sales are generally zero-rated for HST (you don't charge HST to foreign buyers). However, the income is still reportable to CRA. Keep export sales records separate from domestic sales. For significant US sales, consider whether you have US nexus obligations — consult a cross-border accountant.

T2125 and Quarterly Installments

File T2125 with your annual T1. Business type: "Online Retail — E-commerce (Shopify)." Net income from T2125 is added to other income and taxed at your marginal rate. CPP contributions (11.9%) are payable on net self-employment income. If taxes owing exceed $3,000, quarterly installments apply.