Tutoring centre tax: the HST line between credit courses and everything else

Exempt or taxable: the curriculum decides, not the subject

GST/HST exempts a service of tutoring or instructing an individual in a course that is approved for credit by, or follows a curriculum designated by, a school authority. Two centres can teach the same Grade 11 math to the same student and land on opposite sides of the line, because the test looks at what the instruction follows, not what it covers:

The practical consequence: every program in your catalogue needs a classification decision made once, documented, and applied consistently at the point of sale. A centre that charges HST on everything overprices its exempt work by 13 percent; one that charges it on nothing is building a reassessment.

The $30,000 threshold counts only the taxable side

The small-supplier test looks at taxable supplies only — exempt credit-course tutoring never counts. A centre doing $200,000 of exempt curriculum tutoring and $28,000 of test prep is not required to register; add one more prep cohort and it is. Once registered, HST applies to the taxable lines and input tax credits must be allocated: costs tied wholly to taxable programs are fully creditable, costs tied to exempt tutoring are not, and shared costs — rent, utilities, software — get apportioned on a fair and reasonable basis that you document and reuse consistently. We set the allocation method once and bake it into the bookkeeping so each GST34 filing is arithmetic, not archaeology.

Online tutoring adds a second layer: place-of-supply rules. A registered centre tutoring a taxable program to a student in Alberta charges 5 percent GST, not 13 percent Ontario HST — the tax follows the customer's province, and a Zoom-based centre with students in four provinces needs its invoicing system to know that before the first out-of-province enrolment, not after.

Packages sold up front: taxed when received, deferred by reserve

A 20-session package paid in September is income when received — but the Income Tax Act allows a paragraph 20(1)(m) reserve for sessions not yet delivered at year-end, pushing that income into the year you actually earn it. The reserve is only as good as the session tracking behind it, so the booking system and the books have to agree on delivered-versus-sold at year-end. On the corporate side, an incorporated centre files a T2 and pays about 12.2 percent combined in Ontario on its first $500,000 of active income; once federal tax passes $3,000, quarterly instalments start, and a September-heavy cash cycle makes it easy to spend money that already belongs to CRA. We revisit the owner's salary-versus-dividend mix annually rather than letting last year's choice repeat by default, and we calendar the instalments against the enrolment cycle so the March quarter is never a surprise.

Tutors and franchises: the other two audit doors

Most centres pay tutors as contractors on T4A slips, and CRA looks hard at whether that label survives the facts: set schedules, centre-provided materials, hourly rates and exclusivity all point toward employment. A reclassification means retroactive CPP, EI and penalties — if your tutors look like staff, the cheaper fix is planning payroll deliberately, not waiting for a ruling. Franchised centres carry one more file: royalty and fee payments to a US franchisor attract Part XIII withholding, reduced by treaty but never optional, and the gross-up mechanics belong on our tutoring centre cross-border tax page.

What the engagement looks like

Program-by-program HST classification with the paper to defend it, GST34 filings from allocation-ready books, the 20(1)(m) reserve computed from real session data, T4A or T4 runs matched to how tutors actually work, and a T2 that reflects all of it. The full menu is on our tax services page — boutique, cloud-first, fixed fees quoted after a discovery call.

Source: CRA — GST/HST for businesses.