Do you charge HST on a deposit?

Yes. You charge HST on a deposit.

That's the short answer. The longer answer is worth understanding, because a lot of small trades get this wrong — and "wrong" in the CRA's direction, which means you're paying less tax now and potentially owing more later.

How the timing rule works.

Under the Excise Tax Act, GST/HST becomes due on the earlier of two events: the day you issue an invoice, or the day you receive payment. Whichever comes first, that's when the HST clock starts.

A deposit is a payment. When a customer transfers you $1,000 as a deposit on a $4,000 roofing job, you've received $1,000 on the day the e-Transfer lands. The HST on that $1,000 is due in the reporting period that contains that date — not when you finish the job, not when you send the final invoice.

The mistake most people make: they take the deposit, spend it on materials, and then collect HST on the whole $4,000 when they send the final invoice. They've already spent three months' worth of the tax they were supposed to remit in month one. If the CRA audits the period the deposit arrived in, that's an underpayment.

What to put on your deposit receipt.

When you take a deposit, give the customer a document — even a simple one — that shows:

• The date money was received
• The amount received
• The HST on that amount (13% of $1,000 = $130.00, in Ontario)
• The HST number (the one the CRA gave you when you registered)

In QuickBooks, if you create a "Deposit Invoice" or a "Progress Invoice" for the deposit amount, QBO will calculate the HST automatically and track it properly. In Jobber, the deposit field on a quote handles this the same way. If you're doing this manually, a simple receipt document with those four fields is enough.

What the final invoice looks like.

When the job is done, the final invoice shows the full contract amount minus the deposit already paid. The HST on the remaining balance is charged on that remainder, not on the full amount again.

So for the $4,000 job with a $1,000 deposit:

• Deposit receipt: $1,000 + $130 HST = $1,130 received
• Final invoice: $3,000 + $390 HST = $3,390 owing
• Total collected: $4,000 + $520 HST

The HST splits across two remittance periods — the period the deposit arrived, and the period the final invoice was paid — but the total is the same as if you'd billed it all at once.

When the job doesn't happen.

The customer changes their mind and you refund the deposit. You also have to refund the HST. If you kept the deposit but not the HST portion, you'd owe HST you never actually collected — which is also wrong.

If you're keeping part of the deposit as a cancellation fee, you still collected a fee and HST is due on that fee. The refund and HST-credit math gets messier here — this is the scenario where a quick call to your accountant before you do anything saves you a headache later.

The practical takeaway.

If you're already registered for HST and you take deposits, make sure your invoicing software is tracking them properly — specifically, that it's calculating and remitting HST on deposits in the period they're received, not lumping it all into the final invoice.

If you're not registered for HST, this doesn't apply yet. But if your revenues are approaching $30,000 in a calendar year, registration is mandatory — and deposits count toward that threshold from the day you receive them.

The rule is simple once you see it: money received equals tax due. Deposits are money received.