Resell, or specify and step aside
Both models can work; the mistake is drifting into one without pricing it. Buying at trade discount and reselling keeps the procurement margin in the studio, but it also means holding deposits, carrying freight and damage risk, and reporting revenue at gross. Specifying and letting clients purchase direct keeps the filings lean and the risk with the supplier, but hands back the margin. The comparison is a planning exercise, not a philosophy:
| Question | Buy at trade and resell | Specify; client buys direct |
|---|---|---|
| Revenue on your returns | Full resale price of every piece | Design fees only |
| HST on the goods | You collect 13% and claim the input credits | The supplier bills the client, not you |
| Deposits held | Yours to hold, track and sometimes refund | None on goods |
| Freight and damage exposure | Yours until the credit is chased | The client's problem, mostly |
| Margin kept | Fee margin plus procurement markup | Fee margin only |
Many studios land on a hybrid: resell the categories where their trade pricing is strongest, specify the rest. That is fine, as long as the hybrid was chosen with numbers. Our Tax Planning & Advisory engagement builds that model on your actual project history.
The quick method stops fitting as procurement grows
The HST quick method lets small businesses remit a flat percentage of sales instead of tracking every input credit, and in Ontario the remittance rates differ sharply: roughly 8.8% for service businesses and 4.4% for businesses that mainly resell goods. A design studio sits awkwardly between the two, and eligibility caps out at $400,000 of annual taxable supplies, a ceiling that gross resale revenue can punch through while actual profit stays modest. A fee-only designer who elected the quick method years ago may be handing back money the moment procurement scales, because input credits on furnishings, freight and warehousing usually beat the flat-rate savings. We rerun this arithmetic every year, before the election deadline rather than after.
Completions are lumpy; your tax year does not have to be
Studio income arrives when projects complete, which means two installs landing in the same fiscal year can spike income while the following year starves. A corporation absorbs that: profit is taxed at Ontario's combined small-business rate of about 12.2% on the first $500,000, and you draw it out as salary and dividends on your own schedule rather than the projects' schedule. Salary creates RRSP room and CPP; dividends do not; the right mix changes with the year you actually had. Dividends to a spouse who does not genuinely work in the studio run into TOSI and top-rate tax, so family pay gets planned around real involvement, not wishful thinking. One more rhythm worth planning for: after the first profitable corporate year, the CRA expects tax by instalment through the year, and a studio that budgets those against its draw schedule never meets them as a surprise.
Deduct the studio the CRA's way
A design practice owns more depreciable stuff than it thinks. The sample library and showroom fixtures sit in Class 8 at 20% declining balance; computers and rendering hardware in Class 50 at 55%; the vehicle that runs between showrooms, receivers and sites in Class 10, with a mileage log deciding how much of it is deductible at all. Annual ARIDO dues are deductible professional membership fees, and a genuine home studio supports a reasonable workspace claim. Purchases timed just before year-end start their CCA clock a year earlier than purchases timed just after, which is the kind of small, boring decision that compounds. What does not work is writing off pieces that quietly ended up in your own living room; anything the studio bought at trade and kept becomes a taxable benefit, and pretending otherwise is how a pleasant deduction becomes an unpleasant reassessment.
Planning happens before December, not during April
Every lever above closes before the year does: the resell-versus-specify model, the quick-method election, the salary-dividend split, the asset timing. We work through them in a planning meeting ahead of your year-end, document the decisions, and hand the file to the filing side so nothing gets re-litigated in the spring. Our decision guides show how we frame choices like these; the conversation itself starts with a free 15-minute discovery call.
Source: CRA — RC4058, Quick Method of Accounting for GST/HST.
