Who this is for
Anyone renting time in a shared commercial kitchen to make food for sale. Sauces, spice mixes, sweets, baked goods, frozen meals, catering, tiffin, farmers’ market products. Sole proprietors and new corporations alike.
The seven things
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Open a separate business bank account. Every sale in, every ingredient and kitchen payment out, through one account. Mixing it with personal spending is the single biggest cause of messy first-year books.
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Track each sales channel on its own. Farmers’ market cash, a grocery store wholesale account, a website, a delivery app, catering orders. Each pays differently and takes different fees. Record the gross sale for each channel, then the fee as an expense. The deposit in your bank is neither number.
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Keep every commissary and storage invoice. Kitchen rent, cold storage, dry storage, cleaning fees, membership fees. These are deductible, and they are the easiest records to lose because they are often paid by card on a booking app. Download the invoices monthly.
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Separate equipment from supplies. A mixer, a freezer, a sealing machine or a food processor lasts years. It is a capital purchase, claimed over time through depreciation rather than all at once. Gloves, cleaning products and parchment are supplies, claimed in the year. Keep the invoices for equipment in their own folder, with dates.
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Start an inventory list on day one. Ingredients, packaging, labels, products in progress and finished products. At year end you count what is on hand and value it. That figure feeds the cost of goods sold calculation. A monthly count is good practice; a year-end count is required.
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Find out whether your product is taxable for GST. Most basic groceries are zero-rated, so no GST is charged on the sale. But many prepared foods, snacks, sweets, baked goods sold in small quantities and carbonated drinks are taxable. The CRA looks at how a product is packaged, labelled and marketed. Check each product line before you print price lists. Our guide on GST for food products explains the common cases. Registration itself is required once taxable sales pass $30,000.
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Set a monthly bookkeeping routine. One hour at the start of each month: enter sales by channel, match the bank account, file the invoices, note the inventory count. Or send it to us monthly. Twelve small sessions are easier than one large one in April.
One thing most people do not realize
A food producer has inventory, and the CRA expects it to be counted at year end. Inventory includes raw ingredients, packaging, products part-way through and finished products on the shelf. The cost of what is still on hand is not an expense this year. It becomes the cost of the goods you sell next year. Buying ingredients is not the same as expensing them.
What to bring if you want help
- Your commissary agreement and the first month’s invoices
- A list of what you make and roughly what each sells for
- Where you sell: market, wholesale, online, delivery apps, catering
- Receipts for equipment bought so far
- Whether you have a business number, and whether you have registered for GST
- Your current stock of ingredients and packaging, even a rough list
What this guide does not cover
Health permits, food safety certification and labelling law are separate from tax and we do not advise on them. Pricing and whether to incorporate are planning questions. We tell you when one of those needs a different professional.
From the Rex Tax desk
The first-year surprise for most food businesses is the year-end count. Nobody tells a new baker that the flour, the boxes and the frozen stock in the freezer on December 31 have to be valued. Start a simple count sheet now and the year end takes an evening instead of a weekend.
Official sources
- CRA guide T4002, chapter 2: inventory and cost of goods sold
- CRA GST/HST Memorandum 4.3: Basic groceries
- CRA: When to register for and start charging the GST/HST
- CRA: Keeping records
This guide is general information, not advice about your situation. It reflects the rules for the 2026 tax year. It has not yet been reviewed by a practitioner. The information was checked against the official sources listed above on the date shown. Rules change. Check the official sources above or ask us. How we prepare these guides.