Accounting for Hair Salons, Barbers and Spas in BC
Salon books mix services and retail, cash and card, chair rent and commission, tips and gift cards. Each piece has its own tax treatment, and the booking system rarely lines up with the bank by itself.
EverStone CPA handles bookkeeping, payroll and tax for salon, barbershop and spa owners around BC, by email and secure upload, with each fee set in writing up front.
Quick answer: The biggest salon question is whether your stylists rent a chair or work for you. Booth renters run their own businesses and pay you rent; commissioned or hourly stylists are usually employees on payroll. That choice drives payroll, WorkSafeBC, tips and GST, so we settle it first.
Salons and spas we keep books for
Our salon clients include a single barber with two chairs, a colour studio paying stylists on commission, and a day spa with estheticians, treatment rooms and a retail shelf.
We also work with the stylists themselves: booth renters and mobile stylists who need their own self-employed returns.
- Hair salon owners with employed or commissioned stylists
- Barbershops running on walk-ins and card tips
- Salon owners who rent chairs or suites to independent stylists
- Day spas, esthetics and nail studios with treatment staff
- Booth renters and mobile stylists filing as self-employed
- Owners whose sales, tips and gift cards have never been reconciled
Sole proprietor or corporation for a salon
A new chair-renter or one-person studio is usually fine as a sole proprietor. A salon with a lease, staff and a retail line often outgrows that.
Starting out on your own
Income and expenses go on a T2125 with your T1. You pay CPP on both sides and tax on all profit each year. Paperwork stays light while you build a client list.
A salon with a lease and staff
A corporation signs the lease and employs the team, keeping those obligations off your personal balance sheet. Profit kept inside is taxed at 11% combined in BC on active business income.
When it is not worth it yet
If you take out everything the salon earns, the saving is small and the extra filings cost more. We run your own numbers before recommending a move.
Read incorporating vs staying a sole proprietor in BC, or try the incorporation calculator. Incorporation advice covers setup when you decide.
How a salon owner takes money out
Many salon owners still work the floor. You might pay yourself for that work through payroll and take the business profit separately.
Wage for your own chair time
A salary for the hours you cut or treat clients is deductible, builds CPP and RRSP room, and puts you on the same payroll as your team.
Dividends from profit
Profit from the salon as a whole, including chair rent and retail margin, can come out as dividends after year-end, reported on a T5.
Family on the books
A partner who handles bookings or inventory can be paid a reasonable wage for real work. Dividends to family members need a check against the tax on split income.
The salary vs dividends calculator compares the options for your income.
GST and PST on services, retail and chair rent
A salon can have three or four tax treatments in one day’s sales. Your POS needs to be set up to separate them.
GST on services
Cuts, colour and treatments are taxable for GST at 5% once you are registered. Registration is required once taxable sales pass $30,000 in four consecutive calendar quarters.
PST on retail products
Shampoo, styling products and skincare you sell are generally subject to BC PST at 7% as well as GST. Products used up on clients are a cost you pay PST on when you buy them.
Chair and suite rent
Rent charged to booth renters is generally taxable for GST. Renters who are registered can usually claim it back as an input tax credit.
Gift cards
Tax is generally charged when a gift card is redeemed, not when it is sold. Unredeemed balances sit as a liability on your books.
Our GST and PST filing covers both returns. The BC PST guide explains registration and buying for resale.
Booth rental vs employee stylists
The label in your agreement does not settle it. The CRA and WorkSafeBC look at how the stylist actually works.
Signs of a true booth renter
They pay you fixed rent, set their own prices and hours, take payment through their own processor, buy their own products and keep their own client list. They invoice nothing to you.
Signs of an employee
You book their appointments, set the prices, take the payments, supply the colour and pay them a commission or hourly rate. That is usually employment, whatever it is called.
The cost of getting it wrong
A stylist reclassified as an employee can leave the salon owing CPP, EI and WorkSafeBC premiums for past periods, plus interest. Vacation pay at 4% may also be owed.
Employed stylists go through payroll with T4 slips due by the last day of February. Final pay is due within 48 hours when a stylist’s job ends. See employee vs contractor for the full test.
Tips on card and in cash
Tips are income to the person who receives them. What changes is who reports them and whether payroll deductions apply.
Tips the salon pays out
When tips are added to card payments, land in the salon’s account and are paid to staff through payroll, they are generally treated as employment income with source deductions.
Tips handed directly
Cash given straight to a stylist, with no salon involvement, is still taxable income. The stylist reports it on their own return.
Booth renters’ tips
Tips paid to a booth renter through their own processor are part of that renter’s business income, not the salon’s.
The guide to tip reporting and payroll was written for restaurants, and the same principles apply to salon card tips.
Bookkeeping from Square, Fresha and booking software
Your booking and POS system holds the detail; the bank only shows net batches. We reconcile one to the other each month.
Sales by type
Services, retail, chair rent, gift cards sold and gift cards redeemed are each posted to their own account, so the GST and PST figures fall straight out of the books.
Deposits and no-show fees
Booking deposits are held as a liability until the appointment, then applied to the sale. No-show and late-cancellation charges are recorded as income when kept.
Retail inventory
Product on the shelf is counted at year-end. Comparing the count with recorded sales shows how much was used in the back bar, given away or lost.
See monthly bookkeeping. Salons that need to bring a year or more of records current use catch-up bookkeeping, and year-end inventory counts covers the shelf.
Chairs, dryers, spa equipment and leaseholds
Opening or renovating a salon is capital spending, and most of it is claimed over several years rather than at once.
- Styling chairs, dryers, basins and treatment beds are equipment claimed through capital cost allowance
- Plumbing, lighting and finishes in a leased unit are leasehold improvements with their own class
- Laser and esthetic devices are often financed; the lease or loan terms decide how they are claimed
- Small tools such as shears and clippers can often be expensed when bought
- Keep the invoice for each item; a reviewer will ask for it
See CCA classes and the half-year rule before a large purchase.
Monthly checklist for a salon or spa
- Export the sales summary. From your booking or POS system, split by service, retail and chair rent.
- Match card batches. Tie each processor deposit to its sales and record processing fees separately.
- Count cash. Record cash sales and deposit them, keeping the till count sheet.
- Settle tips. Make sure every card tip collected was paid out through payroll.
- Update gift cards and deposits. Sold, redeemed and outstanding, matched to the system report.
- Collect chair rent. Note any renter who is behind and invoice GST on the rent.
- File supplier invoices. Back-bar and retail stock separated.
- Reconcile bank and cards. Every account to its statement balance.
The monthly bookkeeping checklist covers the general steps for any small business.
Salon services and what they cost
- Self-employed return for a booth renter or mobile stylist: commonly $250–$450
- Monthly bookkeeping with POS and tip reconciliation: from $300 a month, GST and PST filing included
- Payroll for stylists and front desk: quoted with the bookkeeping
- Corporate T2 and year-end statements: quoted after a free consultation
- Personal T1 for an employed stylist: from $100
Every fee is fixed in writing first; see our pricing page. We also prepare your corporate T2.
Questions salon owners ask
Are my commission stylists employees?+
Do I charge GST on chair rent?+
Do I charge PST on a haircut?+
I rent a booth. What can I deduct?+
Do you work with salons outside Abbotsford?+
Salon clients come to us from Surrey, Richmond, Burnaby and Kelowna, among other places. If you also run a studio, see fitness and yoga studios; franchised salons can read franchise owners.
Written and reviewed by a Chartered Professional Accountant at EverStone CPA, an Abbotsford CPA firm working remotely with businesses across British Columbia. Updated . You can read client reviews before you get in touch.
Related reading
More for salon and spa owners.
Send an enquiry
Tell us how many chairs or rooms you have, how your stylists are paid and which booking system you use. A CPA replies by email within one business day with a fee in writing.