Accounting for HVAC contractors in Ontario: maintenance plans, equipment and rebates

A maintenance plan sold in March is a liability in March. The cash is in the bank, the visits have not happened, and the money belongs to the customer until they do. Book it as revenue on the day the card is charged and your profit and loss reports a strong spring, your corporate tax comes forward a year, and the one number that tells you whether the plan programme works stays invisible. Of everything an HVAC business does differently from other trades, this is the one that moves the most money.

The plan book, in numbers

Say ninety plans go out in March at $360 each, covering a spring visit and a fall visit. That is $32,400 collected. Delivered evenly over twelve months, March earns $2,700 and $29,700 sits on the balance sheet as unearned revenue. Sell three hundred plans across a year and the unearned balance runs somewhere near $54,000 at any given moment, which is real money you are holding against work you still owe.

The bookkeeping is a recurring journal, not a project. Plan sales post to a deferred revenue liability account, and one monthly entry releases the earned portion into a revenue account that exists only for plan income. Once that account exists you can put the cost of the visits against it and answer the question that matters, which is whether a $360 plan covering two visits actually earns anything after two truck rolls.

The tax side works differently, and the wording of your agreement decides it

This is where the live version of this advice usually stops, and it is the half that costs money.

For accounting you defer. For tax, CRA's position in Income Tax Technical News No. 30 is that amounts received in a year for services not rendered before year end go into income under paragraph 12(1)(a), and the deferral comes back as a reserve claimed under paragraph 20(1)(m). The reserve is optional and it has to be claimed, on the continuity of reserves schedule filed with the T2, and last year's reserve is added back to income this year. Miss the claim and you have paid tax on visits you have not performed.

There is a limit on it. CRA takes the view that subsection 9(1) applies instead, with no reserve available, where the obligations are substantially performed at or shortly after receipt, or where the contract lets you keep the money regardless of whether you perform. Plan agreements written to be aggressively non-refundable can argue you out of your own reserve. Have the agreement and the accounting treatment looked at together rather than separately.

A furnace is inventory, and equipment margin is not labour margin

Equipment stays on the balance sheet until it is installed in a customer's house. That alone separates HVAC from every other residential trade, and it means the year end count has to cover the warehouse and every vehicle, with superseded models and discontinued efficiency ratings written down to what they are actually worth.

The more useful discipline is splitting the install invoice. Take a $12,000 furnace and coil replacement, $1,560 of HST on top:

Equipment is 78 per cent of that invoice at the lower margin, so the blended 38.9 per cent is really a report on your purchasing. Equipment margin moves when a manufacturer changes pricing or a buying group renegotiates. Labour margin moves when a crew gets faster or a callback eats a day. Reported together, a purchasing win hides a scheduling problem for a full quarter.

Setting up the chart of accounts so those two lines stay apart is a half day of work and it is where most of our contractor accounting engagements start.

Rebates come with an HST consequence people miss

Volume rebates and manufacturer allowances are ordinary in HVAC and rare in other trades. Where the rebate takes the form of a reduction in what you paid your supplier and the supplier issues a credit note under section 232 of the Excise Tax Act, the HST originally charged is adjusted with it. CRA's memorandum on refund, adjustment or credit of the GST/HST requires the recipient to add the adjusted tax back when working out net tax for the period the credit note is received, to the extent it was already claimed as an input tax credit.

A $220 per unit rebate on forty units is $8,800, and the add-back is $1,144. The tax is just following the lower price you ended up paying. It still turns into a nasty assessment when nobody filed the credit notes. Keep them with the purchase invoices they relate to.

Manufacturer warranty labour deserves its own revenue line for a similar reason. Where the manufacturer reimburses a flat amount per call, say $95 against a retail rate of $145, sixty warranty calls averaging 1.4 hours produce $5,700 of income against 84 loaded hours at $47, which is $3,948 of cost and a margin of 30.7 per cent. Buried in service revenue it looks like your technicians got slower. On its own line it tells you which equipment line is expensive to stand behind.

Deposits and financing

Two cash items with different tax treatment, and both are common in HVAC because installs get booked months ahead.

A deposit taken in April for an August install is not consideration for the supply until you apply it against the price. Subsection 168(9) of the Excise Tax Act says so, and CRA's memorandum on deposits confirms that tax becomes payable when the supplier applies the deposit, not when it is received. That is genuinely useful for a business that wants cash in the shoulder months. A partial payment against work already agreed behaves differently, and the timing rules for staged work on real property are set out in when HST becomes payable on a construction contract.

Third party consumer financing is the other one. On a $13,560 invoice financed at a six per cent dealer fee, the finance company keeps $813.60 and you receive $12,746.40. The HST you remit is still $1,560, because the customer's price did not change. Record the full $12,000 as revenue and the $813.60 as a cost of the promotion. Netting it against sales understates revenue, hides what the zero per cent offer actually costs you, and makes the equipment margin above look better than it is.

Two peaks means the bills arrive in the troughs

Cooling season and heating season each build cash and each end. The awkward part is that the tax generated by a peak falls due in the quiet weeks that follow it. A quarterly filer with $310,000 of summer install revenue collects $40,300 of HST, claims perhaps $19,000 of input tax credits on equipment, and owes about $21,300 one month after the quarter closes, in a month with very little installation work. Move that money to a separate account as it is collected. Plan revenue helps here too, because it is the only income the shoulder months produce reliably, which is a second reason to be able to see whether the plans are profitable.

TSSA, the refrigerant card and the trade certificates

Individual certification and business registration are separate requirements. A technician holds a certificate to work on gas appliances, and TSSA confirms on its contractor registration page that each technical field requires its own contractor registration, so a shop working in natural gas and propane needs both. The most recent published fuels fee schedule we could verify is version 1.8, effective May 1, 2024: annual contractor registration of $476 under six technicians, $834 for six to ten and $1,848.50 above ten, with a gas technician certificate at $128.50 for a two year term. TSSA announced a 2.4 per cent inflationary increase across its fuels programs effective May 1, 2026, and the fee year runs May 1 to April 30, so budget slightly above those figures and confirm the current schedule at renewal. How your registration has to be displayed is worth asking TSSA directly.

The Ozone Depletion Prevention card is a separate thing under Ontario Regulation 463/10, obtained through a one day approved course with a mark of 75 per cent or higher and valid five years. Ontario's page on the certificate to handle refrigerants is blunt about the limit: you cannot work on or fix refrigeration equipment with only an ODP card. The equipment work needs a Certificate of Qualification.

Five compulsory trades commonly sit inside an HVAC shop: Refrigeration and Air Conditioning Systems Mechanic 313A, Residential Air Conditioning Systems Mechanic 313D, Sheet Metal Worker 308A, Residential Low Rise Sheet Metal Installer 308R and Steamfitter 307A. Each certified person pays $60 plus HST a year to keep the certificate current. Sheet metal is the one that gets overlooked in shops that fabricate their own ductwork. Current rates and thresholds sit on our 2026 Ontario reference page.

Everything else is the compliance any construction business carries. Coverage and clearance certificates run through WSIB, and installation work for builders can pull you over the construction income threshold that triggers T5018 reporting on what you pay other trades.

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General information only, current at August 2026. Tax rules change and GST/HST status is fact-specific. Confirm your own position before relying on anything here.