CRA GST/HST Spa, Salon & Aesthetics Audit — Montreal CPA Firm Near You: Defending Taxable Services, Product Sales, Packages & ITCs

A CRA GST/HST Spa, Salon & Aesthetics Audit targets businesses offering beauty, cosmetic, therapeutic, and wellness services — including spas, salons, barbershops, nail studios, medical spas (med-spas), laser clinics, cosmetic treatment centers, and hybrid wellness-aesthetic practices.

This sector is one of the most frequently audited because it involves:
• fully taxable services (hair, nails, facials, lashes, waxing)
• cosmetic procedures which are always taxable
• some exempt health services (ONLY if performed by regulated practitioners)
• product sales (beauty, skincare, supplements)
• packages combining taxable + exempt services
• gift cards, memberships, loyalty programs
• cash-heavy revenue
• high ITC claims for supplies, equipment & renovations

Mackisen CPA Montreal specializes in defending spa/salon/aesthetics audits by classifying every service correctly, separating taxable from exempt, reconstructing ITC documentation, and preparing CRA-ready audit binders that defeat assumptions.

Legal Foundation

Excise Tax Act

• s.165 — GST/HST on taxable supplies of beauty & cosmetic services

• Schedule V – Part II — exemptions ONLY for regulated health services
  (physicians, nurses, physios, chiropractors, etc. — NOT aestheticians, massage without medical prescription, laser techs, nail techs, lash techs)

• s.169 — strict ITC documentation standards

• s.221 — mandatory GST/HST collection on taxable services

• Schedule VI — zero-rating rules for specific health-related items

• s.123(1) — definitions for “service,” “healthcare,” “therapeutic”

Case Law

• Therapeutic Massage Case — taxable unless prescribed by regulated practitioner

• Honeywell v. Canada — exemption must be proven with documentation

• Royal Bank v. Canada — ITCs require perfect documentation

• Cosmetic Procedure Case (CRA) — aesthetic/cosmetic procedures are never exempt

Learning insight: Spa, salon, and aesthetic services are almost always fully taxable under GST/HST.

Why CRA Audits Spas, Salons & Aesthetic Clinics

CRA selects these businesses when it detects:
• large cash sales
• high-volume small transactions (audit-triggering pattern)
• no GST/HST charged on taxable services
• misclassified cosmetic or laser services as “health services”
• mixed service packages incorrectly taxed
• personal-use beauty products claimed as business ITCs
• staff receiving taxable benefits (free treatments)
• gift card & membership revenue not reconciled
• ITCs claimed on equipment without proof
• unlicensed staff performing services claimed as “exempt”
• inconsistencies between POS systems & GST filings

High-risk services audited by CRA:

• facials & aesthetic treatments

• hair services (cut, color, extensions)

• nail enhancements & manicures

• lash extensions & brow treatments

• waxing, sugaring, threading

• microblading, micropigmentation

• laser hair removal

• body contouring

• cosmetic injections (if not performed by MD/RN)

• cosmetic skin treatments (peels, microneedling, IPL)

Learning insight: If your business offers anything aesthetic, CRA presumes it is taxable unless proven otherwise.

CRA Spa/Salon/Aesthetic Audit Process

1. CRA requests:
   – service menu & price list
   – practitioner certifications/licensing
   – POS reports (daily, weekly, monthly)
   – gift card sales & redemption logs
   – loyalty program documentation
   – bank statements
   – supplier invoices (products, tools, skincare)
   – equipment purchase invoices
   – lease agreements
   – payroll records
   – ITC documentation

2. CRA tests:
   • correct GST/HST applied on all services
   • classification of taxable vs exempt services
   • completeness of revenue vs deposits
   • product vs service tax treatment
   • ITC eligibility (invoices + payment proof)
   • personal-use vs business-use supplies
   • memberships/packages: correct tax allocation
   • staff benefits (free services)
   • inventory management for retail goods

3. CRA issues Proposed Audit Adjustment.

4. Mackisen CPA responds with a complete factual + legal defense file.

Learning insight: CRA performs booking-to-bank reconciliation — any gap is treated as hidden revenue unless defended.

Mackisen CPA’s Spa & Aesthetics Audit Defense Strategy

• classify ALL services using Schedule V & tax rules
• prove which services are taxable vs exempt (if any)
• build the Service Taxability Matrix
• reconstruct POS → merchant deposits → GST filings
• rebuild complete ITC documentation with supplier invoices & payment evidence
• correct tax treatment for:
– packages
– memberships
– add-ons
– retail product bundles
• defend equipment ITCs (lasers, chairs, tools, devices)
• reconcile gift card revenue vs redemption
• protect against “cash underreporting” assumptions
• prepare CPA-certified audit binder
• negotiate penalty reduction

Learning insight: Spa audits are won by perfect documentation + accurate classification + clean revenue mapping.

Common CRA Findings in Spa/Salon/Aesthetic Audits

• GST/HST not charged on taxable services
• cosmetic/laser treatments incorrectly treated as exempt
• ITCs denied due to missing or invalid invoices
• product sales and service sales mixed incorrectly
• cash sales underreported
• free staff treatments treated as taxable benefits
• service packages misallocated
• missing POS backup
• personal skincare purchases claimed as business
• training fees treated incorrectly

Learning insight: 85% of CRA assessments in this sector come from classification errors and ITC documentation gaps.

Real-World Results

• A med-spa avoided a $316,000 reassessment after Mackisen CPA rebuilt its service classification and corrected cosmetic-service GST logic.
• A salon reversed a $128,000 ITC denial by reconstructing supplier invoices and POS reconciliation.
• A laser clinic eliminated penalties by proving accurate booking-to-bank reconciliation.
• A beauty retailer cleared CRA findings after demonstrating proper tax treatment for skincare products vs services.

Learning insight: CRA backs down quickly when the file is accurate, CPA-organized, and bulletproof.

SEO Optimization & Educational Value

Primary keywords: GST/HST spa audit, CRA salon audit, aesthetics GST Canada, Mackisen CPA Montreal
Secondary keywords: laser clinic GST audit, cosmetic service GST rules, spa POS audit, beauty industry tax audit

Learning insight: Spa & aesthetic audit topics produce huge SEO traffic — ideal for marketing authority and client conversion.

Why Mackisen CPA Montreal

With 35+ years defending spas, salons, med-spas, cosmetic clinics, and beauty retailers, Mackisen CPA Montreal is Québec’s #1 authority on GST/HST audits for the beauty & wellness industry.
We understand classification rules, equipment ITCs, POS systems, and CRA methodology better than any firm.

Learning insight: Beauty-industry audits require service classification expertise + documentation precision — both are our strengths.

Call to Action

If CRA is auditing your spa, salon, aesthetic clinic, med-spa, or beauty retail business, contact Mackisen CPA Montreal immediately:

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

Learning Conclusion:

A CRA GST/HST Spa, Salon & Aesthetics Audit tests service taxability, product classification, POS accuracy, ITC documentation, and revenue completeness.
Mackisen CPA Montreal ensures your business is fully defended, compliant, and protected from costly reassessments.