A trade-in taxes the difference, not the price
When a customer trades old jewellery toward a new piece, the Excise Tax Act's trade-in rule in subsection 153(4) applies HST to the price minus the trade-in allowance, as long as the customer is not required to charge HST on the trade-in, which in practice means a consumer. On a $5,000 piece with a $1,800 allowance, tax is charged on $3,200; the $234 the customer keeps is often the nudge that closes the sale.
Most POS systems will happily charge tax on the full price unless someone configures the netting, and we see both failure modes: stores that overcharge customers because the register never nets the allowance, and stores that net trade-ins from businesses that do not qualify. We check how your register handles trade-ins before we sign the first Corporate Tax Filing return, because the HST account and the T2 are built from the same till.
Buying gold from the public: no ITC, all documentation
An outright buy is the mirror image. The person selling you a broken chain charged you no HST, so there is no input tax credit to claim, yet when that metal sells on, as scrap to a refiner or reworked at the bench, HST applies on the full proceeds. The only thing protecting your margin at that point is the documented cost of the buy: date, seller identification, item description, weight, karat and price paid.
Two regimes make that paperwork non-optional. Several GTA municipalities license second-hand and precious-metal buying and set their own record and holding-period rules. And once a single purchase or sale of precious metals, stones or jewellery reaches $10,000, FINTRAC's rules for dealers in precious metals and stones apply: a written compliance program, client identification and large cash transaction reports. A cash-heavy buy book with thin records is exactly the profile CRA reviews go looking for, which is why our CRA Audit & Review Support work so often starts with the buy log.
Bullion is a financial instrument, not jewellery
The HST rules draw a hard line at purity. A bar, ingot, coin or wafer of gold or platinum refined to at least 99.5%, or of silver refined to at least 99.9%, is a precious metal, and selling one is an exempt financial service: no HST charged, and no input tax credits on the costs of making that sale. A gold chain is jewellery whatever its karat, and stays fully taxable. So does the scrap you ship out; metal only becomes an exempt precious metal after refining.
A store that sells bullion coins beside its showcases is therefore running a mixed business for HST purposes, and its input tax credits on rent, software and overhead have to be apportioned between taxable and exempt activity. Done casually, that apportionment is one of the first adjustments an HST auditor makes.
| What crosses the counter | HST treatment | What the file must show |
|---|---|---|
| New or estate piece sold | 13% on the full price | Invoice tied to the piece's stock number |
| Repair or appraisal | 13% on the full charge | Work order and intake record for the customer's goods |
| Trade-in from a consumer | 13% on price minus allowance | The allowance on the invoice; the trade-in costed into stock |
| Outright gold buy from the public | No HST paid, no input tax credit | Seller ID, weight, karat and price on a buy record |
| Bullion at precious-metal purity | Exempt, with related ITCs restricted | Purity on the invoice; ITC apportionment working papers |
The T2 stands on the year-end count
For an inventory business, taxable income moves dollar for dollar with closing inventory, so the corporate return is only as good as the count behind it. We tie the T2 to the piece-level records and the year-end count, and put the store's capital assets in the right CCA classes: showcases, safes and security systems in Class 8 at 20% declining balance, leasehold build-outs in Class 13, back-office computers in Class 50 at 55%. The jewellers block premium is a fully deductible operating cost, not an asset, and a shrink write-off is deductible only when the count records show the loss actually happened.
Cadence matters as much as content. HST filing is annual by default under $1.5 million in taxable supplies, quarterly up to $6 million and monthly above; the T2 is due six months after year-end, with the balance owing due two months after it, or three for many CCPCs claiming the small business deduction at Ontario's roughly 12.2% combined rate on the first $500,000. For owner-managed stores we file the owners' personal returns alongside, so salary, dividends and the corporate year tell one story. Where the piece-level books still need building, our End-to-End Accounting service delivers the records these returns stand on. Every engagement is quoted in writing after a free 15-minute discovery call.
Source: CRA — GST/HST for businesses.
