Machines enter Class 8, and timing sets the first claim
A vending machine is Class 8 property, depreciating at 20% on a declining balance, and the claim starts once the machine is available for use rather than when you paid for it, so a December delivery still crated in the warehouse is not the same as one vending on site. The first-year percentage has moved more than once in recent federal budgets as accelerated-investment rules phase in and out, so we confirm the current rate before you sign a large equipment order; across a tranche of machines the difference between first-year treatments is real money.
Used machines land in the same class at cost, which keeps the auction market attractive for tax as well as price. And when you buy a competitor's route, the purchase agreement's allocation does decades of work: dollars assigned to machines depreciate at 20% in Class 8, while dollars assigned to location agreements and goodwill sit in Class 14.1 at 5%. Buyer and seller want opposite allocations, which is why that number should be negotiated, never defaulted.
Refurbish, retrofit or replace is partly a tax question
The operational call, keep a tired machine running or roll a new one in, has a tax layer that changes the math. Restoring a machine to what it was is generally a current repair, deductible in full this year; making it better than it was is generally capital, added to the class and deducted over years.
| The spend | The usual tax treatment |
|---|---|
| Like-for-like compressor swap on a working machine | Current repair, deducted in full this year |
| Cashless reader retrofit on a coin-only machine | Capital addition to Class 8, 20% declining balance |
| Used machine bought at auction | Class 8 addition at cost, with HST recoverable if registered |
| A competitor's route, machines and locations together | Split by allocation: machines to Class 8, contracts and goodwill to Class 14.1 at 5% |
Disposals matter as much as additions. Scrapping a dead machine leaves its cost in the pool, but selling several units into a strong used market can push the class balance negative and trigger recapture as income, so we plan disposals with the same year's additions in view rather than discovering the result at filing time.
The quick method suits a business short on ITCs
The quick method is an HST election, filed on Form GST74, open to businesses whose annual taxable sales, tax included, stay at or under $400,000. Instead of tracking input tax credits on product and operating costs, an Ontario business buying goods for resale remits 4.4% of its tax-included sales and keeps the rest of the 13% it collected, with a 1% credit on the first $30,000 of eligible sales each year. Critically, ITCs on capital purchases such as machines and readers stay claimable.
Vending has exactly the profile the method rewards, because much of the product cost, milk, sandwiches, fresh food, carried no HST when you bought it, so the credits you surrender were small to begin with. Whether it wins in your particular snack-versus-fresh mix is arithmetic, not opinion: we run both methods against your actual year before electing, and again whenever the mix shifts, since leaving the election has its own timing rules.
Getting profit out, and when structure comes first
Inside a corporation the first $500,000 of active route profit is taxed at roughly 12.2% combined in Ontario, and the gap between that and personal marginal rates is the engine of the plan: profit kept in the company buys machines with lightly taxed dollars, while profit drawn out is taxed again on the way to you. Salary creates RRSP room and CPP but carries payroll deductions; dividends are simpler but build no room. The right mix is a yearly calculation under Tax Planning & Advisory, not a rule of thumb.
Two cautions earn their place. Dividends to a spouse who does not genuinely work in the business are usually caught by TOSI and taxed at top rates, while wages for real route work, filling, collecting, warehouse picking, must be reasonable for the hours actually done. And if the route is still unincorporated, structure comes before strategy; whether and when to make that switch is its own question, handled under Incorporation.
