CRA GST/HST Painting Prep, Drywall Repair & Surface Restoration Audit — Montreal CPA Firm Near You: Defending Taxable Labour, Materials, Subcontractors & ITCs

A CRA GST/HST Painting Prep, Drywall Repair & Surface Restoration Audit targets contractors and service providers offering:

• drywall patching and repair
• plastering & skim-coating
• sanding & surface prep
• wall/ceiling crack repairs
• hole and dent repairs
• water-damage drywall restoration
• pre-painting prep services
• popcorn ceiling removal
• small wall repairs before painting
• spot-priming & undercoating
• patch-and-paint packages
• subcontract drywall finishers

CRA intensely audits this sector because prep and repair services are 100% taxable, yet many contractors operate informally (cash/e-transfer), mix painting and repair services, have inconsistent invoices, and frequently fail GST/HST compliance.

Mackisen CPA Montreal reconstructs job-by-job documentation, validates subcontractors, and ensures all ITCs are properly defended.

Legal Foundation

Excise Tax Act

• s.165 — ALL drywall prep, repair, plaster, and restoration services are fully taxable

• s.221 — contractor must collect GST/HST on all supplies

• s.169 — strict ITC rules (invoice + proof of payment required)

• s.141.01 — allocation for mixed-use tools/equipment

• Schedule IX — correct provincial tax rate (QC/ON/Atlantic)

• s.123(1) — defines “repair,” “improvement,” “installation,” “service”

Case Law

• CGI v. Canada — service location decides GST/HST rate

• Royal Bank v. Canada — ITCs denied if invoices incomplete

• Northwest Company Inc. — no ITCs if invoice lacks mandatory details

• CRA rulings: drywall & prep services always taxable, never exempt.

Learning insight: Surface repair, patching, plaster, taping, prep — all taxable, even if done before painting or renovation.

Why CRA Audits Drywall & Painting-Prep Contractors

CRA flags prep/repair contractors when it detects:

Revenue Risks

• GST/HST not charged on patching, plastering or prep packages
• cash/e-transfer jobs underreported
• “small repair” jobs done without invoices
• supply-and-install misclassified
• drywall materials included but not taxed
• multi-province work taxed incorrectly
• painting + prep bundles underreported
• insurance-claim work misreported
• deposits not reported in the correct GST period

Subcontractor Risks

• subcontract drywall finishers with invalid GST numbers
• helpers treated as contractors without invoices
• T4A or T5018 mismatches
• subcontractors paid in cash

ITC Risks

• missing invoices for:
– drywall, plaster, compound
– sandpaper, tools, primers
– PPE & safety gear
– shop vacuums, HEPA filters
– ladders & dust-containment equipment
– vehicle/fuel/insurance
• personal tools claimed as business
• imported sanders/tools missing s.218 self-assessment
• ITCs overstated for mixed-use home storage

Operational Risks

• job logs missing
• material usage not tied to projects
• quotes vs invoices mismatched
• inconsistent deposit tracking
• equipment used personally and claimed fully
• poor bookkeeping

High-risk operators:

• drywall patching specialists

• painting prep contractors

• handyman-style surface repair contractors

• popcorn ceiling removal teams

• water-damage drywall restoration crews

Learning insight: CRA assumes underreporting + invalid ITCs + subcontractor problems unless documentation is solid.

CRA Drywall/Prep Audit Process

1. CRA requests:
   – job contracts & work orders
   – invoices (labour, materials, travel, extras)
   – subcontractor invoices + GST numbers
   – material receipts (drywall supply stores)
   – equipment purchase invoices
   – bank & e-transfer logs
   – vehicle mileage logs
   – T5018 summaries
   – ITC spreadsheets
   – pictures/reports from restoration jobs

2. CRA tests:
   • correct GST/HST applied to all services
   • subcontractor registration validity
   • ITC documentation integrity
   • QC/ON/Atlantic rate accuracy
   • revenue completeness (logs → invoices → deposits)
   • imported tools → self-assessment
   • personal vs business tools
   • progress payment timing

3. CRA issues Proposed Audit Adjustment.

4. Mackisen CPA prepares full legal & documentary defense.

Learning insight: CRA cross-checks materials purchased → jobs completed → deposits, looking for mismatches.

Mackisen CPA’s Prep & Drywall Audit Defense Strategy

• build a Drywall/Prep Supply Tax Matrix (labour, materials, prep, travel, disposal)
• rebuild GST/HST-compliant invoices
• validate subcontractor GST/HST numbers
• reconstruct ITC binder: materials, tools, PPE, equipment, fuel
• defend vehicle & equipment allocations with logs
• correct place-of-supply rules for interprovincial jobs
• reconcile contract → deposit → invoice → GST filing
• separate personal vs business tool expenses
• justify material waste & consumption
• prepare CPA-certified CRA audit binder
• negotiate removal of penalties & interest

Learning insight: Prep contractors win audits with job-by-job mapping + subcontractor compliance + ITC precision.

Common CRA Findings in Drywall/Prep Audits

• GST/HST not charged on:
– patching
– plastering
– sanding
– popcorn removal
– water-damage repair
– prep bundles
• subcontractor invoices invalid
• ITCs denied due to missing invoices or personal tools
• bank deposits > reported revenue
• imported sanders/tools missing self-assessment
• multi-province GST/HST rate errors
• supply-and-install misclassified
• deposits not reported properly

Learning insight: Most large reassessments come from invoice defects + missing ITCs + subcontractor issues.

Real-World Results

• A drywall repair company avoided a $247,000 reassessment after Mackisen CPA rebuilt project schedules & subcontractor documents.
• A popcorn-ceiling removal team reversed a $139,000 ITC denial with complete tools/material invoices.
• A patch-and-paint contractor eliminated penalties after correcting deposit timing & provincial GST/HST logic.
• A water-damage repair specialist cleared CRA findings via full deposit→invoice→GST reconciliation.

Learning insight: CRA backs down when shown CPA-organized, job-level evidence.

SEO Optimization & Educational Value

Primary keywords: GST/HST drywall audit, CRA painting prep audit, taxable repair services Canada, Mackisen CPA Montreal
Secondary keywords: ITC denial drywall, subcontractor GST audit, sanding & prep GST, patch-and-paint GST/HST rules

Learning insight: Drywall & preparation services rank high in SEO due to broad contractor demand.

Why Mackisen CPA Montreal

With 35+ years defending drywall, prep, and paint-repair contractors, Mackisen CPA Montreal is Québec’s #1 authority on GST/HST construction-trade audits.
We understand material usage, subcontractors, job costing, progress billing, and CRA methodology inside out.

Learning insight: Drywall/prep audits require evidence accuracy + proper ITCs + subcontractor documentation — all provided by Mackisen CPA.

Call to Action

If CRA is auditing your drywall repair, painting prep, surface restoration, or job-site services, contact Mackisen CPA Montreal immediately:

📞 514-276-0808
📧 info@mackisen.com
🌐 mackisen.com

Learning Conclusion:

A CRA GST/HST Drywall & Prep Audit tests labour taxability, material classification, subcontractor compliance, ITC documentation, and deposit accuracy.
Mackisen CPA Montreal protects your construction operation from costly reassessments.