Deposits and progress invoices
How to invoice money taken up front, when GST/HST applies to a deposit, and how the deposit comes off the final bill.
Taking money up front is normal on trade and project work. Problems start when a deposit is taken by text message with no invoice. Put it on paper.
Invoice the deposit
Treat a deposit as a real invoice: its own number, the job it is for, the amount, the tax, and a note that it will come off the final invoice.
A common pattern on renovation and installation jobs:
- a deposit to cover materials,
- a progress payment at a set point in the job,
- the balance when the work is done.
Put that schedule on the estimate so the customer agrees to it before you order anything.
In CollabNorth
- On a new estimate, set a deposit, as a percentage or a fixed amount.
- When the customer accepts the estimate (online, or you tap Mark as accepted), a deposit invoice is created for you.
- When you Convert to invoice, the deposit is carried over as a deduction on the final invoice, linked to the deposit invoice.
If you convert while the deposit is still unpaid, you are asked to confirm and give a reason, for example "Deposit received by cheque".
GST/HST on deposits
- A deposit that is applied to the price of a taxable job is generally taxed when it is applied to the price.
- A truly refundable security deposit, held and given back, is treated differently until it is kept or applied.
The simple approach most small businesses use: charge tax on the deposit invoice at the same rate as the job, then deduct the deposit (with its tax) on the final invoice, so the customer is not taxed twice.
Progress invoices
On longer jobs, invoice for the part of the work that is done: by percentage, milestone or hours. Each progress invoice is a normal invoice with its own number, tax and due date. Be specific: "Framing complete, 40% of contract" is easier to defend than "Progress payment 2".
CollabNorth doesn't have a special progress billing tool yet. Send each progress invoice as a regular invoice.
Deposit or retainer?
A deposit is a down payment on a specific job. A retainer holds your time and is often drawn down over months. Invoice both.
This is general information to help you keep your own records. It is not tax or legal advice.
Based on: CRA guide RC4022, General Information for GST/HST Registrants
Last checked: 2026-10-12