Integrating PayPal and Stripe: How to Account for Online Payment Fees — CPA Firm Near You, Montreal

Introduction

For online businesses in Quebec — including Shopify stores, e-commerce brands, consultants, freelancers, and digital service providers — PayPal and Stripe are essential payment processors. But many business owners don’t realize that PayPal and Stripe do not deposit your full sales amount. Their fees must be recorded properly, reconciled monthly, and reported accurately for tax purposes. Incorrect reporting leads to misstated revenue, missed Input Tax Credits (ITCs), and CRA/Revenu Québec discrepancies. This guide explains how to account for PayPal and Stripe fees correctly and how a CPA firm near you in Montreal can help keep your books accurate and audit-proof.

Legal and Regulatory Framework

Under the Income Tax Act and the Taxation Act of Quebec, businesses must record gross revenue, not the net amount deposited in their bank. PayPal and Stripe reduce payouts by deducting processing fees, merchant fees, currency conversion charges, and sometimes dispute-related adjustments.

Businesses must therefore track:
• Gross sales
• GST/QST collected
• Payment processor fees
• Net deposits to bank accounts

Payment processing fees are deductible business expenses. GST/QST may apply to certain fees depending on the processor and transaction type. CRA requires supporting merchant statements, payout reports, invoices, and documentation for all adjustments.

Key Court Decisions

Courts have ruled that businesses must report total sales, not net deposits. Judges have denied deductions where merchants failed to document processing fees or relied solely on bank deposits. Several rulings confirm that platform payouts (Shopify, PayPal, Stripe) are insufficient for tax reporting unless reconciled to invoices and merchant statements. Courts also emphasize that year-end revenue must match transactional records across all platforms.

Why CRA and Revenu Québec Target PayPal and Stripe Users

E-commerce businesses are heavily audited because:
• Revenue reported on tax returns often does not match payment platform data
• Businesses record net deposits instead of gross sales
• PayPal/Stripe fees are unreported or missing
• GST/QST collected on platforms is not remitted properly
• Chargebacks and refunds are not recorded accurately
• Multi-currency transactions create mismatched amounts

PayPal, Stripe, Shopify, Amazon, and other platforms provide data directly to tax authorities, allowing them to cross-check filings.

Mackisen Strategy

At Mackisen CPA Montreal, we help online businesses integrate PayPal and Stripe seamlessly into their accounting systems. We:
• Reconcile monthly payout summaries
• Separate gross revenue from processing fees
• Track refunds, chargebacks, and disputes
• Map GST/QST correctly to taxable and zero-rated sales
• Categorize merchant fees as deductible expenses
• Align PayPal/Stripe data with Shopify, WooCommerce, Etsy, Amazon, or custom platforms
• Prepare clean year-end financials that match CRA and Revenu Québec expectations

Our team ensures your books accurately reflect your true revenue and expenses — essential for reducing audit risk.

Real Client Experience

A Montreal Shopify seller declared revenue based on bank deposits only, missing over $28,000 in PayPal and Stripe fees. CRA assumed underreported income. We reconstructed all merchant statements, separated fees, and reconciled payouts, resolving the discrepancy. Another business incorrectly tracked chargebacks as expenses rather than revenue adjustments; we corrected historical filings and prevented a reassessment.

Common Questions

Should I record PayPal/Stripe revenue as net or gross?

Always gross. Net deposits lead to underreported revenue.

Are PayPal and Stripe fees deductible?

Yes. They are fully deductible business expenses.

Do I need to track GST/QST on PayPal/Stripe transactions?

Yes. GST/QST applies based on the nature of the sale, not the processor.

How do I track refunds or chargebacks?

By adjusting both revenue and GST/QST, and reconciling them with merchant statements.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps online businesses correctly account for PayPal and Stripe transactions, ensuring accurate reporting, maximum deductions, and full audit protection. Whether you process a few digital payments or manage thousands of monthly transactions, our expert team ensures clarity, compliance, and seamless integration.