Med spas and cosmetic clinics
Accounting for Med Spas and Cosmetic Clinics in Ontario
Last reviewed: August 2026
A med spa is one of the few businesses that sells exempt and taxable services from the same treatment room, on the same day, sometimes to the same patient.
Get that line wrong and you either collect HST you did not need to, or fail to collect HST you did, and CRA only ever notices the second one. We handle corporate tax, bookkeeping, HST and payroll for Ontario med spas, injector-led clinics and physician-owned cosmetic practices.
The cosmetic versus medical line
The Excise Tax Act defines a cosmetic service supply as one made for cosmetic purposes and not for medical or reconstructive purposes. Schedule V, Part II then excludes those supplies from the health care exemption entirely. The result: cosmetic treatments are taxable at 13% in Ontario, and the exemption survives only where the supply is genuinely made for medical or reconstructive purposes.
| Treatment | Usual HST treatment |
|---|---|
| Neuromodulator for facial lines | Taxable at 13% |
| Neuromodulator for a diagnosed medical condition | Potentially exempt, depends on purpose and documentation |
| Dermal filler for aesthetic enhancement | Taxable at 13% |
| Laser hair removal, skin resurfacing, microneedling | Taxable at 13% |
| Reconstructive work following injury, disease or congenital abnormality | Potentially exempt |
| Retail skincare, supplements, devices | Taxable at 13% |
The billing code does not decide it
The purpose of the supply does, supported by the chart. A clinic that treats everything as exempt because a physician is involved, or everything as taxable because it is a spa, is wrong in both directions.
Mixed clinics have an input tax credit problem
Not just a collection problem. If part of your revenue is exempt, you cannot recover all the HST you pay on rent, equipment, product and professional fees. The recovery has to be apportioned on a fair and reasonable basis, documented and applied consistently. Most clinics either claim everything, which is wrong, or claim nothing, which is expensive.
Confirm your specific treatment mix before relying on any of the above. The purpose test is fact-specific and the consequences run both ways.
The other four things that break med spa books
Gift cards
A gift card sale is not revenue and is not subject to HST when sold. It becomes both when redeemed. Clinics that book gift card sales as revenue overstate a good December and understate the January and February that follow, and they hand CRA an HST timing problem at the same time.
Prepaid packages and treatment series
A six-session package paid up front is deferred revenue. Revenue is recognised as sessions are delivered, which means a liability sits on your balance sheet for the unused portion. With a few hundred packages running this is a material number, and it is the main reason a med spa's profit and loss can look healthy while the bank account does not.
POS and booking system reconciliation
Most clinics run a booking platform, a payment terminal and a bank account that never agree. Tips, refunds, chargebacks, package redemptions, deposits and product sales all move differently. Until the three are reconciled properly every month, your revenue number is an estimate.
Paying injectors and associates
A nurse injector working under a medical directive, on your premises, with your product, to your booking schedule, is very often an employee for CRA purposes regardless of what the contract says. Getting it wrong makes the clinic liable for unremitted CPP, EI and income tax, plus penalties and interest.
What we handle
- Corporate tax (T2) and the owner's personal tax (T1)
- HST, including the cosmetic versus medical analysis, input tax credit apportionment for mixed clinics, and registration timing
- Bookkeeping in QuickBooks Online, with the POS, booking platform and merchant deposits actually reconciled
- Deferred revenue setup for packages and gift cards, as a recurring monthly entry rather than a year-end scramble
- Payroll, T4 and T5, including associate and injector classification
- Reporting by service line, so you can see whether injectables, laser and retail each make money on their own
Frequently asked questions
Do med spas charge HST in Ontario?
Usually yes. The Excise Tax Act defines a cosmetic service supply as one made for cosmetic purposes and not for medical or reconstructive purposes, and Schedule V, Part II excludes those supplies from the health care exemption. Aesthetic treatments are therefore taxable at 13% in Ontario. Retail products are always taxable.
Is Botox taxable or exempt in Ontario?
It depends on why it is administered. Neuromodulator injected for facial lines is a cosmetic service supply and is taxable at 13%. The same product injected to treat a diagnosed medical condition may be exempt. The purpose of the supply decides it, and the chart is the evidence.
Can my clinic claim input tax credits if some revenue is exempt?
Only partially. Input tax credits can be claimed on inputs used in making taxable supplies. Where a clinic makes both exempt and taxable supplies, the recovery must be apportioned on a fair and reasonable basis, applied consistently and documented. Claiming everything is a reassessment risk, and claiming nothing leaves money on the table.
Do I charge HST when I sell a gift card?
No. A gift card is not subject to HST on sale and is not revenue at that point. HST applies and revenue is recognised when the card is redeemed against a taxable service or product.
How should prepaid treatment packages be accounted for?
As deferred revenue. Payment received up front is a liability until the sessions are delivered, with revenue recognised as each session is performed. Booking the full amount as revenue on sale overstates profit in the month of sale and can accelerate corporate tax on income not yet earned.
Is my nurse injector an employee or a contractor?
Frequently an employee, whatever the agreement says. CRA applies a two-step approach for contracts formed outside Quebec, looking at the parties' shared intent and then at the actual relationship: control over how and when the work is done, who owns the tools and product, and who carries the chance of profit and risk of loss. An injector working your schedule, on your premises, with your product, under your medical directive scores as an employee on most of those.
When does a med spa have to register for HST?
Once taxable supplies exceed the small supplier threshold of $30,000 over four consecutive calendar quarters. Because most med spa revenue is taxable, this happens quickly. Registration can also be voluntary, and for a clinic with significant startup equipment and leasehold spending it is often worth doing early to recover the HST on those costs.
What is the corporate tax rate for a med spa corporation in Ontario?
From July 1, 2026, an Ontario CCPC pays 9% federal plus 2.2% Ontario, a combined 11.2% on active business income within the small business limit. The Ontario portion was 3.2% before that date, and years straddling July 1, 2026 are prorated.
Talk to an accountant who works with med spas
Fixed fees quoted up front. The cosmetic versus medical line, package deferrals and POS reconciliation are routine work here.