Online income is taxable the federal government said Thursday, and warned Canadians who sell goods using eBay to pay up to avoid penalties.

“I strongly encourage eBay sellers, and for that matter, any taxpayer who has not already done so, to correct their tax affairs as soon as possible to avoid penalties or prosecution,” said Jean‑Pierre Blackburn, Minister of National Revenue.

As a result of a Federal Court of Canada decision, eBay Canada has provided the Canada Revenue Agency (CRA) with the names of eBay sellers as well as their contact information and sales records.

The CRA can use this information to determine if the eBay sellers properly reported the income they earned from sales made on eBay.

“If the CRA determines that an individual or a business did not comply with the tax laws, the CRA will take any necessary action,” the agency said in a release.

“In addition to paying any outstanding taxes plus interest, consequences may include penalties, as well as legal actions that could result in fines and other imposed sanctions.”

The CRA said it will not prosecute or penalize those who voluntarily correct or disclose tax information before an audit or other compliance action is initiated.

“To avoid paying these fines and penalties, taxpayers who have failed to file income tax returns for past years or who have not reported all their income can voluntarily correct their tax situation,” said Blackburn.

Under the Voluntary Disclosures Program (VDP), taxpayers who take the initiative to correct or disclose any information will not be penalized or prosecuted if they make a full disclosure before the CRA starts any audit or other compliance action.

The CRA expects that the audits, based on the information received from eBay, will begin at the end of the summer.

“The CRA will then begin contacting eBay sellers to ensure that they have filed all required returns and accurately represented the full scope of their business income. If necessary, it will conduct an in‑depth audit to ensure that all taxpayers and businesses pay their taxes.”

IE