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Record payment processor fees as a business expense, separate from your sales, and never net them off the revenue. If a customer pays $113 and your processor deposits $109.42, your books still show $100 of sales, $13 of HST owing and $3.58 of fees. Skip that split and your revenue, your tax and your profit all come out wrong.
Why can’t you just book the deposit?
Because the deposit is what’s left after somebody else took a cut. Book $109.42 as revenue and you understate sales by $3.58 on that one order. Do it on a thousand orders and your GST/HST return reports less tax than you charged customers. The CRA works from what customers paid, not from what reached your bank. A tidy bank feed with every deposit dropped straight into a revenue account looks fine for months, then falls apart the day you reconcile your first return.
Don’t do it.
The rate in that example is an assumption, 2.9% plus 30 cents per payment, picked to show the arithmetic. Your processor’s rate will differ, and nobody here can tell you what a given processor charges. Read your own statement.
How does one sale look in the books?
| Line | Amount |
|---|---|
| Customer pays (Ontario, 13% HST) | $113.00 |
| Sales revenue | $100.00 |
| HST collected, owed to the CRA | $13.00 |
| Processing fee, 2.9% of $113 plus $0.30 (assumed) | $3.58 |
| Deposit to your bank | $109.42 |
The GST/HST calculator confirms the $13 on a $100 sale in Ontario. The fee is plain arithmetic: $113 times 0.029 is $3.277, plus 30 cents, rounded to $3.58. Then $113.00 less $3.58 is the $109.42 deposit. Notice the fee is charged on the full $113, tax included. You pay processing on money that was never yours to keep.
Where do processing fees go?
They’re a cost of earning your income, so they normally go in your expenses. If you file as a sole proprietor, the CRA’s form T2125 has an expenses section with set lines. Pick the line that fits. We didn’t confirm which line the CRA prefers for card fees, so check the form’s instructions or ask whoever files your return.
What if the fee statement shows GST/HST on top of the fee? Then you may be able to claim it back as an input tax credit, if you’re registered. Keep the statement, because the CRA’s documentary requirements for input tax credits expect the supplier’s registration number on purchases of $30 or more. Whether a given processor charges tax on its fees is something we couldn’t confirm, so look at the line on your statement rather than assume.
What do fees do to your margin?
More than people expect on small orders. On that $100 sale the fee is $3.58, or 3.58% of the pre-tax price, because the percentage applies to the tax-inclusive amount and the 30 cents is flat. On a $10 item plus HST ($11.30), the same rate gives $0.33 plus $0.30, or $0.63 in fees, which is 6.3% of the price. Run your own products through the profit margin calculator with the fee included, then check the change with the percentage calculator.
Cheap items are where a per-payment fee hurts. If half your orders are under $15, a small flat charge can matter more than a half point on the percentage. Picture a stall selling $12 art prints online: a fee that looks like pocket change on one sale is real money by December.
What about refunds and chargebacks?
A refund cuts your sales and the tax on them. Whether the processor gives back its fee on a refund depends on the processor, so don’t guess. Record what the statement shows, not what you expect.
Chargebacks are worse, because the money leaves your account before you’ve agreed the sale was bad. Book them in a separate account so you can see how often it happens. And don’t let a monthly statement sit unread for a quarter. Fee changes tend to show up quietly on one line.
The fee is deductible, so it lowers your profit. The self-employed tax calculator shows how profit turns into tax, though it leaves out EI.
A simple monthly routine
Download the processor’s monthly report, not just the bank deposits. Check that sales plus tax, less fees and refunds, equals what landed in your account. If the numbers differ by a few dollars, find out why now. That ten-minute habit is what keeps a year-end tidy-up from turning into a weekend at the kitchen table.
The sources behind this page
The 13% Ontario HST rate is the Canada Revenue Agency‘s published rate. The processing rate in the example is invented for illustration. Business expense lines come from the CRA’s T2125 guidance for sole proprietors. This site is independent and not affiliated with the CRA.
Frequently asked questions
Are payment processor fees deductible in Canada?
They're normally a business expense. Which form line to use depends on how you file, so check the CRA's T2125 expense section or ask whoever prepares your return.
Should I record the deposit or the sale?
Record the sale at the full price the customer paid, then the fee as an expense. The deposit only proves the payout.
Is HST charged on processing fees?
We couldn't confirm that for every processor. Look at your statement, and claim an input tax credit only on tax actually shown.
Do I get the fee back on a refund?
It depends on the processor, so read the statement rather than assume.
Where do chargebacks go?
Track them separately from ordinary fees so you can see how often they happen.
- Self-employed taxes in Canada: income, CPP and GST
How tax works when you are self-employed in Canada: reporting income and expenses, paying both halves of CPP, instalments and when to register for GST