Hobby or Business? How CRA Classifies Artist Income and Why It Matters — CPA Firm Near You, Montreal

Introduction

Many Quebec artists — painters, sculptors, writers, musicians, crafters, digital creators — earn income from their creative work without knowing whether they’re running a business or simply pursuing a hobby. CRA and Revenu Québec make a clear distinction, and the classification determines whether you can deduct expenses, claim losses, or must charge GST/QST. Misclassification is one of the top audit triggers for artists. This guide explains how CRA decides if artistic work is a business and how a CPA firm near you in Montreal can help ensure your filings are correct.

Legal and Regulatory Framework

Under the Income Tax Act and the Taxation Act of Quebec, a business exists when the activity is carried on with a reasonable expectation of profit. Artists must report business income when:
• They regularly produce and sell work
• They market their art online or in galleries
• They take commissions
• They attend fairs, exhibits, or markets
• They earn royalties or licensing income
• They operate with commercial intent

Hobby income is still taxable, but hobby losses cannot be deducted, while business losses may reduce taxable income when justified.

GST/QST registration is required when taxable supplies exceed $30,000 over four consecutive quarters — regardless of whether the artist considers themselves a “hobbyist.”

Key Court Decisions

Courts have ruled that artists may operate a business even without high profits, as long as they demonstrate:
• A genuine commercial intention
• Evidence of marketing and sales efforts
• Proper record-keeping
• Participation in exhibitions or marketplaces
• Reasonable pricing and production schedules

Courts have also denied business status when artists:
• Had no intention of selling their work
• Kept poor or no records
• Treated expenses as personal
• Had no promotional or sales activity
• Claimed large losses for many years without business indicators

The key test is intention and conduct, not income level alone.

Why CRA and Revenu Québec Target Artists’ Classification

Audits occur frequently because many artists:
• Claim losses without showing commercial intent
• Mix personal and business expenses
• Earn irregular or untracked sales
• Fail to charge GST/QST when required
• Lack receipts for supplies, travel, and materials
• Cannot demonstrate organized business operations

Auditors compare gallery records, online shop data, social media presence, fair participation, and bank activity.

Mackisen Strategy

At Mackisen CPA Montreal, we help artists determine business status and prepare audit-proof documentation. We:
• Evaluate whether your artistic activity qualifies as a business
• Build proper bookkeeping systems for sales and expenses
• Prepare GST/QST registration and filing schedules
• Separate personal and artistic expenses
• Track inventory of supplies and finished work
• Prepare financial statements and tax returns
• Document commercial intent for audit protection

Real Client Experience

A Montreal painter claimed business losses for years with no online shop, shows, or pricing strategy. CRA classified the activity as a hobby. We rebuilt records, established a sales plan, documented commercial intent, and restored business classification going forward. Another digital artist was questioned about GST/QST; we demonstrated business activity through sales receipts and platform payouts.

Common Questions

How does CRA decide if I'm running a business?

By looking at your intention, organization, marketing efforts, and sales activity.

Can a hobby become a business later?

Yes. Once commercial intent begins, you can reclassify and deduct expenses.

Do artists have to charge GST/QST?

Yes, once income exceeds $30,000 in taxable supplies.

Can I deduct studio expenses?

Only if your artistic activity is considered a business, not a hobby.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps artists properly classify their income and maximize tax deductions. Whether you sell occasionally or operate a full-time studio, our expert team ensures precision, transparency, and audit protection.