Furniture store tax services: landed cost, bundled fees, and write-downs done right

Costing inventory that arrives by the container

Duty, freight, and brokerage on an imported container are not a separate expense. They belong capitalized into inventory cost, spread across the units in that shipment. That way, your cost of goods sold reflects what each piece actually cost to land, not just its factory price. The CRA expects inventory valued consistently, generally at the lower of cost or fair market value. A floor model that has been marked, damaged, or discontinued can be written down. But that write-down needs documentation supporting the new value, applied the same way every year rather than adjusted opportunistically at filing time.

Most furniture retailers cost inventory by SKU, using an average or specific-identification method tracked through their point-of-sale or inventory system. The CRA expects that method applied consistently. Switching methods between years, or between product lines, without a documented reason is a common trigger for questions on review.

HST on a bundled sale, and a rule tied to the delivery address

Furniture, delivery, and assembly are all fully taxable. So bundling them into one invoice does not create the exempt-plus-taxable complications some other retailers face. The whole invoice is taxed the same way regardless of how the fees are itemized. What does matter is a rule less obvious than it sounds: the applicable HST rate follows the delivery destination, not the store’s location. A furniture retailer delivering across a provincial line, not uncommon for stores near a provincial border, needs to charge the rate for where the goods are delivered. That rate can differ from the rate at the point of sale.

Optional furniture protection plans sold alongside a purchase are a separate question from the furniture itself. When the plan is genuinely underwritten by a third-party insurer, the premium is generally exempt from GST/HST as a financial service. That is unlike the taxable furniture it is sold with. That is a distinction worth confirming with whoever underwrites the plan your store offers, since the tax treatment depends on how the plan is actually structured.

Warranty reserves are a management number, not a tax deduction

It is common, and useful, to set aside a warranty or returns reserve for internal planning. But the CRA does not allow a general reserve for future warranty claims to reduce this year’s taxable income. Only the actual cost of a warranty replacement or return incurred in the year is deductible. The reserve you track for cash flow purposes and the number that goes on the tax return are two different things. Treating them as the same one is a common and avoidable error. The same principle applies to protection plan revenue if your store retains any of it rather than passing it entirely to the underwriter. Retained amounts are taxable income to the store, tracked separately from the furniture sale it accompanied.

Trade credit terms and interest deductibility

Extended supplier terms — 60, 90, or 120 days — are a form of trade credit rather than a loan. They carry no deductible interest of their own. The cost, if any, is usually built into the purchase price. Where a store instead uses a bank line of credit or an inventory financing facility to fund a container, the borrowed interest works differently. It is a straightforward deductible expense. The two should not be confused when reconciling what actually financed a given shipment. Only one of them belongs on the interest expense line of your return.

Financing fees are a real deduction, and structure matters at scale

A dealer fee paid to a third-party financing company is a deductible business expense. That is the same as any other cost of making a sale, whether the sale is promotional or not. The mistake is not deducting it. It is failing to isolate it from revenue in the first place, which understates both figures at once. Once a furniture business is running delivery crews, holding significant inventory, and carrying real liability exposure, incorporating is worth a serious look. It typically helps for both tax deferral and asset protection reasons. That step is covered on our furniture incorporation page. For the inventory and landed-cost bookkeeping this all rests on, see our furniture bookkeeping guide.