Most craft market vendors know they should be tracking their expenses. Far fewer actually do it consistently, and the ones who don't pay for it at tax time, either in stress, missed deductions, or a rushed scramble to reconstruct months of receipts. Setting up a simple system now costs less than an hour. Here's what to track and how to do it.
What Counts as a Deductible Business Expense
As a self-employed Canadian vendor or small business owner, you can deduct expenses that are reasonable and incurred to earn business income. For craft market vendors, that includes:
Direct production costs:
- Raw materials (wax, clay, fabric, resin, pigments, herbs)
- Packaging (boxes, tissue paper, bags, labels, stickers)
- Tools and equipment used for production (molds, kilns, heat presses, sewing machines)
- Consumables that don't make it into the final product (sandpaper, wire, adhesive)
Market and selling costs:
- Booth fees for all markets and pop-up events
- Tent, tables, shelving, display equipment
- Point-of-sale hardware (Square reader, card reader)
- Transaction fees from payment processors
Business operations:
- Insurance (liability insurance for vendor events)
- Accounting software subscriptions
- Website hosting and domain fees
- Shopify, Etsy, or other platform fees
- Shipping supplies and postage for online orders
- Business-related postage and courier fees
Marketing:
- Product photography
- Paid social media ads
- Printing costs for business cards, banners, flyers
Vehicle use:
- If you drive to markets or to pick up supplies, you can deduct the business-use portion of your vehicle expenses. Keep a mileage log: date, destination, purpose, and kilometers. CRA requires this log to substantiate vehicle claims.
Home workspace:
- If you produce from home, you may be able to deduct a portion of your home expenses (rent or mortgage interest, utilities, internet) based on the percentage of your home used exclusively for business. The CRA has specific criteria for this, so confirm you qualify before claiming it.
What you cannot deduct: personal expenses, meals unless they're a legitimate business meeting (and only 50% of those), and anything you can't document with a receipt or record.
Simple Tracking Methods
Spreadsheet (free, sufficient for most vendors):
A basic Google Sheet or Excel file with columns for date, description, category, amount, and HST paid works for the majority of early-stage vendors. Create one tab per month or one tab per quarter. Update it weekly, not monthly. The longer you wait, the harder it is to remember what a charge was for.
Keep a matching folder (physical or digital) for receipts. Photograph paper receipts immediately and save them to a Google Drive or Dropbox folder organized by year and month.
Wave Accounting (free):
Wave is a free Canadian-friendly accounting platform that handles income and expense tracking, invoicing, and basic financial reports. It connects to your bank account and credit card to import transactions automatically, which you then categorize. For vendors who want something more structured than a spreadsheet without paying for software, Wave is the right starting point.
QuickBooks Self-Employed or QuickBooks Simple Start:
QuickBooks is the most widely used small business accounting software in Canada and integrates directly with many banks and payment processors including Square. The Self-Employed plan (around $10 to $20/month) automatically separates personal and business transactions, tracks mileage via your phone, and generates a tax summary at year-end. Worth the cost if your volume justifies it or if you have an accountant who works in QuickBooks.
How to Prep for Tax Season
Keep records for six years. CRA can audit up to six years back. Your records (receipts, bank statements, sales records) need to exist for that window.
Reconcile regularly. At minimum, do a monthly check: compare your expense tracker to your bank statement and make sure everything is recorded and categorized.
Track income as carefully as expenses. Every market, every online sale, every custom order. Your total revenue determines whether you're approaching the HST threshold and is the starting point for your tax return.
Separate your accounts. If you don't already have a separate bank account for your business, open one. Even a no-fee business account or a second personal account used exclusively for business makes bookkeeping dramatically easier.
Work with an accountant at least once. A Canadian accountant familiar with self-employment and small business can review your first year of records, confirm you're capturing the right deductions, and set you up with a system that works for future years. The cost is also deductible.
Tracking as you go is always easier than reconstructing at the end of the year. Build the habit now.
Find more resources for Toronto vendors at Daily Market Stories.
