Where the exemption actually stops
Helping a student through Grade 12 chemistry or Grade 9 math is exempt tutoring, because the school grants credit for the course being tutored. An SAT, LSAT, GMAT or MCAT class is taxable at 13%, because no school authority gives credit for the test. Enrichment sits on the taxable side too. The deciding question for every line in the catalogue is simple to ask and rarely asked: is this a course the student's school gives credit for?
Getting it wrong costs money both ways. A centre charging 13% on curriculum tutoring has parents overpaying, and every dollar collected in error still has to be remitted. A centre charging nothing on its prep classes gets assessed for 13% it never collected, out of its own margin, plus interest. Before we file anything we walk the program list and settle each one.
The position also needs paper. We map each exempt program to the Ontario course it supports, MCR3U functions, SCH4U chemistry, ENG4U English, so the invoice, the program description and the curriculum line up if a reviewer ever compares them. Prep and enrichment programs get described as what they are; an SAT class relabelled as math tutoring does not survive a review that reads the centre's own website.
Registration counts only the taxable side
The $30,000 small-supplier threshold measures taxable supplies only. A centre can bill hundreds of thousands in exempt curriculum tutoring and still be judged solely on its prep and enrichment revenue, which means some large centres are not required to register while smaller prep-heavy academies are. Once registered, HST is charged on taxable programs only, and input tax credits follow the same boundary: they recover tax on inputs only to the extent those inputs support taxable activity, under an allocation method that is fair, reasonable and used consistently. The method gets documented once and applied every period, because switching approaches opportunistically is exactly what a reviewer looks for.
| The input | The ITC answer |
|---|---|
| Instructor fees and materials for the SAT class | Full credit, used in taxable activity |
| Workbooks for curriculum tutoring | No credit, exempt activity |
| Rent, utilities and insurance on the centre | Apportioned between exempt and taxable use |
| Advertising that promotes the whole centre | Apportioned |
| Franchise royalty billed with HST | Apportioned across the programs it supports |
The contractor model, examined before the CRA examines it
The hourly-tutor-as-contractor model is standard in this industry and fragile under review. The CRA weighs the facts: who sets the rate, whose students are being taught, who supplies the curriculum and the room, and whether the tutor carries any real chance of profit or risk of loss. A tutor teaching the centre's students, from the centre's materials, at the centre's posted rate looks like an employee no matter what the contract says.
Where the contractor position holds, each tutor gets a T4A for fees paid. Where it fails on review, the centre is assessed retroactively for both shares of CPP and EI plus penalties. Our filing work keeps the documentation consistent with the position claimed: written agreements, tutor invoices, and evidence tutors are free to teach elsewhere. Tutors who have incorporated themselves and bill the centre as their only client raise a separate flag, the personal services business rules, worth settling before it compounds.
The T2 behind the centre, and the T1 behind the owner
Corporate Tax Filing for an incorporated centre applies Ontario's roughly 12.2% combined small-business rate to the first $500,000 of active income, deducts royalty and marketing-fund charges as the franchisor's statements support them, and carries the unearned-session balance with student-level backup, since the Act permits a reserve for sessions paid for but not yet delivered at year-end. The owner's return is coordinated in the same pass, so salary, dividends and the family's instalments line up with what the corporation filed.
Registered centres also choose an HST filing frequency. Annual filing with instalments suits a small taxable side; quarterly filing matches a prep-heavy academy's cash rhythm and shortens the distance between collecting the 13% and remitting it.
When a letter arrives asking about the exempt split or a tutor's status, CRA Audit & Review Support answers it with the working papers already built. Clean program coding through the year, the kind End-to-End Accounting maintains, is what makes these filings routine instead of forensic.
