A deposit is not income, and not HST, yet
Under the GST/HST rules, a true deposit triggers no tax when it is taken. HST becomes payable only when the deposit is applied against the service, or when it is forfeited. The accounting matches: a wedding-party booking taken in November for a March date is a liability at year-end, not December revenue, and pulling it into income early means paying tax a full year before you have to.
The word matters more than owners expect. A deposit held against a future appointment keeps that treatment; a prepayment for the service is consideration, and HST follows the money immediately. Booking pages built in Fresha or Square use the two words interchangeably. Ours do not, because the wording decides when the tax clock starts, and December is full of gift cards and party bookings that belong to next year.
No-show fees include their own HST
When a client forfeits a deposit, the forfeited amount is treated as tax-included: the shop remits 13/113 of what it kept. A $50 forfeited deposit leaves you about $44.25, not $50. A cancellation fee charged separately to the card on file is taxable too, because it relates to a taxable service. None of this makes a strict no-show policy wrong; it makes the pricing wrong if the fee was set assuming every dollar stays.
We help owners set the deposit amount and the cancellation window with the tax already in the math, and we book forfeitures on their own revenue line, so a no-show problem shows up as a pattern to fix instead of hiding inside service sales.
The buildout: where every dollar lands
A renovation is not one expense; it is five or six different tax lives. Work bolted into a leased space goes to Class 13 and deducts straight-line over the lease term plus the first renewal option, never faster than five years. The furniture and machines deduct faster on declining balance, and true repairs deduct now. Because salon sales are taxable, the 13% HST on the whole buildout comes back as input tax credits, an advantage the exempt medical clinic next door never sees.
| Buildout cost | Tax treatment |
|---|---|
| Walls, plumbing, flooring, built-in wash stations | Class 13 leasehold: straight-line over the lease term plus first renewal, minimum five years |
| Styling chairs, dryers, laundry equipment | Class 8, 20% declining balance |
| POS terminal and computers | Class 50, 55% declining balance |
| Repainting and fixing what was already there | Current expense, deducted this year |
| Landlord cash inducement toward the work | Income when received, unless an election applies it against the Class 13 cost |
Timing matters twice. Assets deduct only once they are available for use, so a buildout finished the first week of a new fiscal year starts deducting a year later than one finished in the last week of the old one. And a lease with a short remaining term makes Class 13 painfully slow, which is worth knowing before you negotiate the renewal, not after the contractor is paid.
Owner pay, instalments and the slow months
An incorporated shop should revisit the salary and dividend mix every year, not inherit last year's answer: salary builds RRSP room and CPP; dividends carry less admin; and dividends to family members who do not genuinely work in the shop are usually taxed at top rates under TOSI. Incorporation itself, and whether the shop is ready for it, is a separate decision we treat on its own page.
Instalments deserve the same calendar. A salon's cash is seasonal: gift-card December is not the month to discover a catch-up HST instalment, and the quiet late-winter weeks are not the months to be over-remitting. We map remittances against the booking curve so the CRA gets paid on time out of the right month's cash.
Planning runs on a calendar, not adrenaline
This is the standing agenda of Tax Planning & Advisory: deposit policy checked against the HST rules, buildout spending classed before it happens, remuneration and instalments reviewed at fixed points in the year. When the renovation needs money behind it, Business Financing Advisory joins the same meeting; Walla Assaf spent years in banking and corporate finance before founding the firm, and lender conversations are familiar ground. We plan for salons across the GTA, and every engagement is quoted in writing after a free 15-minute discovery call.
