CRA GST/HST Upholstery Repair, Furniture Re-Covering & Cushion Restoration Audit — Montreal CPA Firm Near You: Defending Taxable Labour, Material Tracking, Subcontractors & ITCs

A CRA GST/HST Upholstery Repair & Furniture Re-Covering Audit targets:

• upholstery repair technicians
• sofa/chair re-covering specialists
• furniture restyling & re-padding services
• cushion restoration & foam replacement
• leather/vinyl repair technicians
• furniture repair for hotels, restaurants & Airbnb units
• subcontract upholstery sewers
• mobile upholstery repair operators

The upholstery sector is a high-audit area because it involves:

• 100% taxable labour
• large amounts of material (fabric, foam, leather, batting)
• subcontract sewing labour
• cash/e-transfer payments
• multi-day projects with partial deposits
• imported fabric & tools
• high ITC claims for equipment

Mackisen CPA Montreal specializes in defending upholstery businesses through GST/HST compliance correction, subcontractor validation, and reconstruction of ITCs for fabric, foam, tools and vehicle usage.

Legal Foundation

Excise Tax Act

• s.165 — ALL upholstery repair, restoration & re-covering services are fully taxable

• s.221 — mandatory GST/HST collection

• s.169 — ITCs must be backed by full documentation

• s.141.01 — mixed-use rules for tools, machines & vehicles

• Schedule IX — GST/HST determined by the location where the furniture is serviced

• s.123(1) — defines “repair,” “manufacture,” “service,” “labour”

CRA & Case Law

• Upholstery repair = taxable

• Fabric + labour bundles = taxable

• Leather repair = taxable

• Delivery/pickup = taxable

• Royal Bank v. Canada — missing invoice elements → denied ITCs

• CGI v. Canada — place-of-supply based on where the service occurs

• Northwest Company Inc. — strict supplier invoice requirements

Learning insight: There is no exemption for upholstery repair or re-covering — these are taxable fabrication/repair services.

Why CRA Audits Upholstery & Furniture Restoration Contractors

Revenue Risks

• GST/HST not charged on labour
• fabric/foam reimbursed without GST
• deposits & installment payments unreported
• cash/e-transfer payments not invoiced
• pickup/delivery fees missing GST
• commercial clients under-reported (restaurants, Airbnb, hotels)
• part-delivery of projects not linked to GST periods
• imported leather/fabrics not taxed on resale

Subcontractor Risks

• sewing subcontractors not GST-registered
• unreported helper labour
• cash payments without invoices
• invalid GST numbers
• misclassification of sewers as “employees” or vice versa

ITC Risks

• missing invoices for:
– fabric, vinyl, leather
– foam, batting, webbing, piping
– sewing machines, tools & needles
– industrial staplers, compressors
– PPE (gloves, masks)
– vehicle fuel/repairs
• imported fabric/tools missing s.218 self-assessment
• personal upholstery projects claimed as business
• home workshop overclaimed for ITC purposes

Operational Risks

• missing job logs (before/after photos, hours spent)
• fabric/foam usage inconsistent with revenue
• unclear cost allocation between labour vs materials
• multi-item projects not itemized
• no purchase orders for commercial clients
• quotes + invoices not matching

High-risk operators:

• mobile upholstery repair

• high-volume restaurant/hotel upholstery contractors

• couch/chair re-coverers

• leather/vinyl repair specialists

• subcontract-heavy upholstery teams

Learning insight: CRA heavily compares material usage (fabric/foam) with revenue filed.

CRA Upholstery Audit Process

1. CRA requests:
   – invoices (labour, material, travel, pickup/delivery)
   – subcontractor invoices + GST numbers
   – bank & e-transfer statements
   – job logs (hours, photos, materials used)
   – supplier receipts (fabric, foam, tools, staples, leather)
   – mileage logs
   – ITC spreadsheets
   – import documentation for tools/fabric
   – commercial contracts

2. CRA tests:
   • GST/HST applied to all labour + material bundles
   • consistency of logs → invoices → deposits
   • subcontractor GST/HST compliance
   • ITC accuracy & proof of payment
   • imported materials → self-assessment
   • place-of-supply rules
   • commercial vs residential project reconciliation

3. CRA issues a Proposed Audit Adjustment.

4. Mackisen CPA prepares the full legal + documentary defense.

Learning insight: CRA rebuilds the entire business using material purchases, job logs & banking activity.

Mackisen CPA’s Upholstery Audit Defense Strategy

• create an Upholstery Tax Matrix (labour, materials, pickup/delivery, travel)
• rebuild GST/HST-compliant invoices
• verify subcontractor GST numbers
• reconstruct ITC binder (fabric, foam, tools, vehicle, PPE)
• reconcile logs → invoices → deposits → GST returns
• justify material wastage (cut-loss, foam trimming)
• correct interprovincial GST/HST application
• rebuild imported-fabric/tool self-assessment
• prepare CPA-certified CRA audit binder
• negotiate penalty + interest relief

Learning insight: Upholstery audits are won through material-to-job matching, subcontractor compliance & ITC discipline.

Common CRA Findings in Upholstery Audits

• GST/HST not charged on re-covering
• subcontractor invoices invalid
• ITCs denied for missing receipts
• imported fabric/tools missing GST
• bank deposits > reported sales
• jobs not itemized properly
• material usage too high or too low
• personal projects claimed as business

Learning insight: Material reconciliation is CRA’s #1 audit trigger.

Real-World Results

• A furniture-restoration contractor avoided a $173,000 reassessment after Mackisen CPA rebuilt material usage and subcontract documents.
• A high-volume restaurant upholstery provider reversed a $121,000 ITC denial with full supply and tool invoices.
• A mobile re-covering technician eliminated penalties by properly applying GST/HST on labour + materials.
• A sofa-repair crew cleared CRA findings via deposit → invoice → job log reconciliation.

Learning insight: Organized material + labour evidence is unbeatable.

SEO Optimization & Educational Value

Primary keywords: GST/HST upholstery repair audit, CRA furniture recovering audit, taxable repair services Canada, Mackisen CPA Montreal
Secondary keywords: upholstery ITC denial, subcontract sewer audit, foam/material GST, imported fabric GST/HST

Learning insight: Upholstery audits are strong SEO drivers due to industry confusion about supply vs service classification.

Why Mackisen CPA Montreal

With 35+ years defending upholstery repair crews, furniture-restoration companies & subcontract sewing teams, Mackisen CPA Montreal is Québec’s #1 authority on GST/HST upholstery-sector audits.
We understand material flows, subcontract labour, job logs, and CRA methodology deeply.

Learning insight: Upholstery audits require precise documentation, material matching & subcontractor compliance — all strengths of Mackisen CPA.

Call to Action

If CRA is auditing your upholstery repair, furniture recovering, leather/vinyl restoration, or foam replacement service, contact Mackisen CPA Montreal immediately:

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

Learning Conclusion:

A CRA GST/HST Upholstery Audit tests taxable labour, material documentation, subcontractor GST compliance, ITC accuracy & revenue reconciliation.
Mackisen CPA Montreal ensures full audit protection.