Accounting for Auto Repair Shops and Mechanics in BC
A repair shop is part service business and part parts store. Every work order mixes technician labour, parts marked up from a supplier, shop supplies and two sales taxes, and the books only work when each piece is tracked on its own.
EverStone CPA works online with independent shops and mobile mechanics throughout BC, for a fee agreed in writing before we start.
Quick answer: A BC repair shop generally charges both 5% GST and 7% PST on parts and on repair labour for vehicles. The accounting priorities are a parts inventory that matches the shelves, warranty claims reconciled to what the payer actually sent, and technician payroll run correctly. Most growing shops operate through a corporation.
Shops and mechanics we work with
We support owners who turn wrenches and owners who mostly run the front counter. What they share is a shop management system, a parts account with several suppliers, and techs on payroll.
- Independent general repair garages with two to ten bays
- Mobile mechanics working from a service van
- Specialty shops: transmission, diesel, tires, brakes or collision
- Heavy-duty and fleet repair for trucking and equipment owners
- Franchise service centres paying royalties and ad fund fees
- Shops whose building sits in a separate holding company
Owners usually reach out when something has stopped adding up: the parts account never balances, a PST audit letter arrives, or the shop is busy every day yet the bank balance does not move. Each of those has a bookkeeping cause we can trace.
Incorporating a repair shop
A one-person mobile mechanic can run happily as a sole proprietor. A shop with a lease, hoists, inventory and staff usually reaches the point where a corporation makes sense.
Sole proprietor
Shop income and expenses go on a T2125. The self-employed filing deadline is June 15, but any balance owing is due April 30. Profit is fully taxed in your hands each year.
Corporation
Profit left in the company is taxed at the 11% combined small-business rate on active income. That retained cash funds parts stock, a new alignment rack or a down payment on the building.
Owning the building
Some owners hold the shop property in a separate company that rents to the operating company. Associated corporations share one $500,000 business limit, so structure is worth planning before you buy.
Our incorporation advice covers the move, and when multiple corporations make sense explains the holding-company question.
How shop owners pay themselves
Once incorporated, you choose how much comes out as salary and how much as dividends. Shops with heavy inventory or debt often keep more in the company and draw less.
Salary on the shop payroll
Deductible to the company and reported on a T4. Builds CPP and RRSP room, and gives a bank a clear personal income when you apply for a mortgage or equipment loan.
Dividends at year-end
Declared from profit after the books close, reported on a T5. Less admin through the year, but no RRSP room and no CPP.
Keep personal vehicles out
Working on your own or family vehicles with shop parts and time is a taxable benefit if it is not paid for. Ring it through the system and pay for it like any customer.
Model it with the salary vs dividends calculator, or read bonus vs dividend at year-end.
GST and PST on parts and repair labour
Auto repair is one of the BC industries where PST reaches labour as well as parts. Repairing or maintaining a vehicle is generally a taxable service for PST, so a typical invoice carries 5% GST and 7% PST on both lines.
On the buying side, parts you resell can be bought PST-exempt by quoting your PST number to the supplier. Shop supplies you use up, like rags, solvents and tools, are taxable when you buy them. Getting that split wrong is a common audit finding.
Fees for diagnostics, shop supplies and disposal also need the right tax codes. We check how your shop software is set up, then file the separate GST and PST returns. See the BC PST guide, the GST audit guide and our sales tax filing service.
Warranty work, cores and comebacks
Warranty and third-party claims
When a manufacturer, an extended-warranty company or an insurer pays for a repair, the payer is your customer for that portion. Track each claim as a receivable until paid, and reconcile any amount the payer reduces.
Customer deductibles
The vehicle owner may pay a deductible or a non-covered portion. Invoice that part separately so the sales tax follows the right payer.
Core charges
Core deposits paid to suppliers, and core charges billed to customers, need their own accounts. Otherwise credits for returned cores vanish into parts cost.
Your own comebacks
Redoing a job under your own guarantee costs labour and parts with no revenue. Tag comebacks in the system so you can see the true cost each month.
Parts inventory and shop management software
Parts inventory is where repair shop books most often drift. The system says one thing, the shelves say another, and the difference ends up buried in cost of sales.
Receiving and returns
Parts ordered for a job, returned unused, or swapped for the right part need clean credits from the supplier. We reconcile supplier statements monthly so returns are not paid twice.
Year-end count
Count stock at year-end and write off obsolete parts. Vehicles on the hoist mid-repair are work in progress and may need recording too.
Gross margin by line
Labour, parts and tires each earn a different margin. Separate revenue and cost accounts show which part of the shop pays the rent.
See inventory accounting in BC and the year-end inventory count guide. Our monthly bookkeeping reconciles your shop system to the general ledger.
Technician payroll and WorkSafeBC
Technicians may be paid hourly, flat-rate per billed hour, or a mix with bonuses. Each method has to meet minimum employment standards for hours actually worked.
Apprentices attend school blocks, which affects scheduling and payroll. Vacation pay is 4%, rising to 6% after five years. Shop employees need WorkSafeBC coverage, and premiums follow your reported payroll. T4 slips are due by the last day of February.
Many techs own their tools. Tool allowances or reimbursements need to be set up correctly so they are not treated as taxable pay by mistake. Our payroll services take this on, and the remittance calendar shows the due dates.
Track billed hours against clock hours for each technician. The gap between the two, called efficiency, tells you more about shop profit than almost any other number on the books.
Hoists, diagnostic tools and service vehicles
Hoists, alignment machines, tire changers, scan tools and compressors are capital purchases claimed through CCA. Software subscriptions for diagnostics and repair data are usually ordinary expenses.
Leasehold improvements to a rented bay follow their own rules. A tow truck, parts runner or courtesy car is a vehicle, so log its use. If you also sell used vehicles, check the provincial dealer licensing rules before you do; that is a separate regulated activity. The CCA classes guide covers the classes.
Month-end checklist for a BC repair shop
- Close open work orders. Invoice finished jobs and list vehicles still in the shop.
- Reconcile supplier statements. Match invoices, credits and core returns for each parts supplier.
- Chase warranty claims. Follow up anything unpaid or short-paid.
- Match card batches. Daily terminal settlements back to the shop system’s payments report.
- Check tax codes. Spot-check invoices for GST and PST on both parts and labour.
- Review technician hours. Clock time versus billed time for each tech.
- Remit source deductions. CPP, EI and income tax to the CRA on time.
- Log comebacks. Note any rework and its cost.
Share this with your service manager: everstonecpa.com/accountant-for-auto-repair-shops-bc#month-end-checklist.
Fees for repair shop accounting
- Mobile mechanic’s self-employed return: commonly $250–$450
- Monthly bookkeeping, inventory and GST/PST filing: from $300 a month
- Books, payroll and year-end T2 bundled for a trades corporation: usually $450–$650 a month
- T2 corporate return and financial statements: quoted after a free consultation
- Fractional controller for multi-location shops: from $1,500 a month
Every fee is fixed in writing first. The schedule is on our pricing page.
Questions from repair shop owners
Is PST charged on auto repair labour in BC?+
Do I pay PST on parts I resell?+
How should warranty repairs be recorded?+
Can my flat-rate techs be contractors?+
Written and reviewed by a Chartered Professional Accountant at EverStone CPA, an Abbotsford CPA firm working remotely with businesses across British Columbia. Updated . Feel free to look at client reviews before you write.
Related reading
Other pages for shop owners.
Ask about your shop
Number of bays and techs, which shop system you run, and whether you are incorporated. A CPA answers within one business day with a fixed quote.