GST/HST on a Massage Clinic's Commission Split (the RMT 70/30 Question)

This is one of the most common questions Canadian clinic owners ask, and one of the most muddled. You run a massage clinic. Your RMTs work on a commission split, say 70% to the therapist and 30% to the clinic. Massage is taxable for GST/HST. So who charges the tax, on what, and to whom? Does HST come off the top of the client charge, or does it apply to the split between the therapist and the clinic? Do both of you register? Does the 30% the clinic keeps have tax on it?

It gets tangled because there are potentially two separate supplies happening, and people mix them up. Let's take them one at a time. This is written for Ontario and BC clinics. The mechanics are the same across Canada; only the rate changes (13% HST in Ontario, 5% GST in BC, since BC is not a harmonized province).

A note before we start: this is general information, not tax advice for your specific setup. The right answer depends on how your arrangement is actually structured, and a CPA who has looked at your agreements should confirm it. What follows is the framework so you can ask the right questions.

First question: who is the supplier to the patient?

Everything flows from this. When a client books a massage and pays, who are they buying the service from? The clinic, or the individual therapist?

This is not a matter of vibes. It depends on how the arrangement is set up, whose name the client is contracting with, who sets the price, who carries the booking and the payment, and how the agreement reads. But in the large majority of commission clinics, the answer is the clinic. The client books through the clinic, pays the clinic, the clinic sets the rates, and the therapist is compensated by the clinic out of what the clinic collects. In that structure, the clinic is the supplier of the massage to the patient.

That single fact drives the tax treatment on the client charge, so pin it down first. If you actually operate the other way, where each therapist is independently supplying the client and merely renting space and admin from you, the treatment flips (more on that below). But if the clinic is the one supplying the service, read on.

The client charge: HST applies once, on the full price

Massage therapy is a taxable supply for GST/HST purposes. It is not exempt the way many other health services are. (This trips people up, because so much of the health field is exempt. RMT services are taxable across Canada.) So the client pays tax on the massage.

Here is the key point that clears up most of the confusion. The HST applies once, to the full price the client pays, and the supplier charges and remits it. If the clinic is the supplier, the clinic charges HST on the whole massage fee and remits that HST to CRA.

A $100 massage in Ontario is $100 plus $13 HST, so the client pays $113. The clinic collects the $13 and remits it. That is the entire tax event on the service to the client. The commission split has not entered the picture yet, because the split is a separate transaction between the clinic and the therapist. It does not change what the client pays or what tax sits on the client charge.

Jane handles the client-facing tax correctly if your items are set up right, taxable services flagged taxable, exempt ones flagged exempt. The place clinics go wrong is not the client charge. It is thinking the split itself gets taxed on top, or forgetting that the 70/30 is a second transaction with its own tax question. So let's look at that second transaction.

The commission split: it depends whether the therapist is an employee or a contractor

Now, the 70/30 between the clinic and the therapist. Whether GST/HST applies here comes down to a threshold question you have to answer first: is the therapist your employee, or an independent contractor?

If the therapist is an employee, there is no GST/HST on their pay, full stop. Wages are not a supply. You withhold source deductions, you issue a T4, and the 70% (or however the comp is structured) is payroll. No sales tax runs between you and an employee. Done.

If the therapist is an independent contractor, then the therapist is supplying a service to the clinic, and now GST/HST can come into play on that supply, depending on the therapist's registration status and how the arrangement is characterized. This is the case that generates all the r/cantax threads, so let's work it through.

The contractor case: two ways the arrangement gets characterized

When the therapist is a contractor, tax authorities and accountants generally see the money moving one of two ways, and which one you are in depends on how your agreement is written and who is really supplying whom.

Characterization A: the clinic supplies the patient, the therapist supplies services to the clinic. The clinic collects $113 from the client (with the clinic remitting the $13 HST). The clinic then pays the therapist their 70% as a fee for the therapist's services to the clinic. If the therapist is a GST/HST registrant, the therapist's 70% fee to the clinic is itself a taxable supply, so the therapist charges the clinic GST/HST on their fee, and the clinic (being registered) claims it back as an input tax credit. It nets out for the clinic but the paperwork has to be right. If the therapist is not registered and is under the threshold, no tax on the fee. This is the more common reading when the clinic clearly owns the client relationship.

Characterization B: the therapist supplies the patient, and pays the clinic for space and services. Here the therapist is the supplier to the client. The therapist charges the client, the therapist charges and remits the HST on the massage, and then the therapist pays the clinic the 30% as rent or a facility/administration fee. Now the taxable supply between them runs the other direction: the clinic is supplying premises and admin to the therapist, so the clinic's 30% may carry GST/HST that the clinic charges to the therapist. Whether the 30% is taxable depends on what it actually is (a licence to use space plus services is generally taxable; a true residential-style lease is different, though that rarely applies to a treatment room).

The reason this matters so much: in Characterization A the clinic remits tax on the full $113 to the client and the therapist's fee may or may not add tax depending on registration. In Characterization B the therapist remits the tax on the client charge and the clinic charges tax on its 30% cut. Same 70/30 economics, completely different tax filings and registration obligations. You cannot know which one you are in by looking at the percentages. You have to look at who contracts with the client, whose name is on it, who sets the price, and what the written agreement says.

Most commission clinics I see are structured, or intend to be structured, as Characterization A: the clinic is the face to the patient. But plenty of clinics operate loosely and have never papered which one they are, and that is exactly where the exposure lives.

The $30,000 registration threshold

Whether anyone has to charge GST/HST at all runs into the small supplier threshold, and it is worth being precise about it because it is where a lot of the individual-therapist confusion comes from.

A person (a clinic, or an individual therapist) must register for GST/HST and start charging it once their taxable revenue exceeds $30,000 over four consecutive calendar quarters. Below that, they are a small supplier and are not required to register or charge tax (they can choose to register voluntarily, but they are not required to).

For the clinic, this is usually academic. A clinic doing real massage volume blows past $30,000 quickly and is registered. So the clinic charges HST on client massages, no question.

For an individual therapist on a commission split, it depends on how the arrangement is characterized and what counts as their revenue. In Characterization B, where the therapist is supplying the client directly, the therapist's own taxable revenue is the full value of the massages they perform, and that will cross $30,000 fast for a working RMT, meaning the therapist has to register and charge HST on the client charges themselves. In Characterization A, where the therapist is supplying a fee to the clinic, the therapist's taxable revenue is their fee income, and whether that crosses the threshold is its own calculation. This is precisely why "do I need to register?" has no single answer for a commission therapist. It depends which structure you are in.

One practical trap: a therapist who thinks of themselves as "just getting paid a percentage" but is actually structured as supplying the client directly can be over the threshold and not charging tax they are required to charge. That is a real liability that compounds quarter over quarter, and it is often invisible until CRA asks. Getting the characterization straight is not academic. It decides who is on the hook.

Mixed clinics: taxable and exempt services under one roof

Most clinics are not pure massage. You have RMTs, and you might also have a physiotherapist, a counsellor, a naturopath, and a retail shelf. This is where the GST/HST gets fiddly, because the services do not all carry tax the same way, and Jane will happily let you flag them wrong.

Here is the rough map for a typical multidiscipline Canadian clinic:

• Massage / RMT services: taxable. HST or GST applies on the client charge.
• Physiotherapy: exempt. No GST/HST on physio services (it is a listed health service).
• Psychotherapy and counselling therapy: exempt since June 20, 2024. This changed recently. Psychotherapists and counselling therapists became exempt federally as of that date, so counselling sessions should no longer carry GST/HST. If your Jane items still have tax on counselling, that is over-collection you need to fix.
• Chiropractic: exempt. A listed health service, no tax on the service.
• Naturopathic services: exempt, but the dispensary is taxable. The naturopath's consult is exempt; the supplements and products they sell off the shelf are taxable retail.
• Retail and products (oils, supports, supplements, gift shop items): taxable. These are ordinary taxable goods.

The problem this creates: if you blanket-apply tax across everything, you over-remit on your exempt physio and counselling and chiro revenue, which is money left on the table and a wrong payable. If you blanket-exempt everything, you under-collect on massage and retail and you owe CRA tax you never charged. Either way the GST/HST return does not tie to the books, and it is very hard to unwind after several quarters of it.

The fix is to map tax by service in your chart of accounts and in Jane, so each item carries the treatment it should: taxable RMT and retail flagged taxable, exempt physio and counselling and chiro flagged exempt, naturopath split between exempt service and taxable dispensary. Set it once and the split happens automatically on every invoice, and the return ties back to the books without manual sorting. There is also an input tax credit angle here (a clinic making both taxable and exempt supplies generally cannot claim full ITCs on all its costs and has to apportion), which is its own conversation, but the first job is getting the revenue side flagged correctly.

What to actually do

If you take one thing from this, let it be the order of operations. First, nail down who supplies the patient, because that decides where the tax on the client charge sits. Second, decide whether your therapists are employees (no tax on their pay) or contractors (tax may apply on the supply between you, in whichever direction your structure runs). Third, check the $30,000 threshold for anyone who might be supplying the client directly. Fourth, if you are a mixed clinic, get every service and product flagged for the right tax treatment so taxable and exempt don't get blended.

Get those four straight and the 70/30 stops being confusing. The split is just economics. The tax follows from who is supplying whom, and once that is clear, so is everything else.