Accounting for HVAC Contractors in Ontario: Service Contracts, TSSA Costs and Two Peak Seasons
- Jul 30
- 7 min read
Updated: 6 days ago
Last reviewed: July 2026
An HVAC business has the most complicated revenue recognition of any residential trade. You sell installations, service calls, and annual maintenance agreements that are paid up front and delivered over twelve months. That last one is deferred revenue, not income, and treating it as income is the single most common reason an HVAC owner's profit and loss shows a good year while the bank account disagrees.
You also carry two regulatory layers most trades do not, TSSA fuels certification and an environmental refrigerant certificate, and you have two peak seasons with a soft shoulder between them.
What makes HVAC different
Feature | Financial consequence |
Annual maintenance agreements paid up front | Deferred revenue, recognized over the term, not on receipt |
Equipment inventory | Furnaces and condensers are real inventory, not an expense on purchase |
Two peak seasons | Cash flow has two builds and two drains, not one |
TSSA certification and registration | Recurring regulatory cost that must be in your rate |
Refrigerant handling certificate | Separate provincial requirement with a 5-year life |
Warranty callbacks | A real cost with no revenue, needs measuring |
Maintenance agreements are deferred revenue
A customer pays $360 in March for a year of maintenance covering a spring and a fall visit. That is not $360 of March revenue.
The correct treatment recognises the revenue as the service is delivered, which means a liability on your balance sheet for the unperformed portion. With a few hundred agreements running, this is a material number, and getting it wrong distorts everything:
Profit is overstated in the month of sale and understated in the months you actually do the work
Corporate tax can be paid early on revenue not yet earned
The business looks more profitable than it is, which is a serious problem if you are borrowing or selling
Margin per agreement is invisible, so you cannot tell whether the programme makes money
The practical setup in QuickBooks Online: agreement sales post to a deferred revenue liability account, and a monthly journal entry releases the earned portion to revenue. Once configured it is a recurring entry, not a project.
Worth doing properly because maintenance agreements are also the best structural fix for HVAC seasonality. Recurring revenue at a predictable margin through the shoulder months is exactly what a two-peak business needs, and it is only worth building if you can see whether it is profitable.
Equipment inventory
A furnace sitting in your warehouse is inventory. A condenser on the truck is inventory. Neither is an expense until it goes into a customer's house.
HVAC carries higher unit-value stock than most trades, which means the year-end count matters more. It also means:
Code equipment purchases to inventory, not straight to cost of sales
Count at year end and adjust, per location and per vehicle
Watch aged stock. A discontinued model or a superseded efficiency rating is worth less than its cost, and pretending otherwise overstates both assets and profit
Track equipment margin separately from labour margin. They move independently, and manufacturer rebates and buying-group pricing change the picture
The regulatory cost base
Two separate things, and HVAC contractors conflate them constantly.
Individual certification. No person may install, alter, purge, activate, repair, service or remove a gas appliance unless they hold a certificate. TSSA issues Gas Technician certificates in classes G.1, G.2 and G.3, plus oil burner technician classes. Certificates run for two years and expire on the holder's second birthday after issue. Missing renewal means a twelve-month suspension, then cancellation.
Business registration. No person may act as a contractor unless registered for the purpose. This is separate from any individual's certificate. The registration certificate must be displayed at your premises, and every field vehicle must show the contractor's name and registration number. Each technical field needs its own registration, so a shop working on both natural gas and propane needs both.
Published TSSA fees, effective May 1, 2026:
Item | Fee |
Gas technician certificate, initial or renewal, two years | $136.00 |
Challenge examination | $255.50 |
Other examination | $89.00 |
Contractor annual registration, under 6 technicians | $506.00 |
Contractor annual registration, 6 to 10 technicians | $886.50 |
Contractor annual registration, over 10 technicians | $1,964.50 |
Contractor pre-registration, under 6 technicians | $1,042.50 |
TSSA runs a May 1 to April 30 fee year. Propane and liquid fuels have separate fee schedules. Examination fees are payable per attempt, pass or fail.
The refrigerant certificate is a third thing. Handling refrigerants containing ozone-depleting substances requires an Ozone Depletion Prevention (ODP) certificate card, issued by the Ontario government under Regulation 463/10 after a one-day approved environmental awareness course with a minimum score of 75%. It is valid five years. Course fees vary by provider.
Important and widely misstated: an ODP card is not a licence to work on refrigeration equipment. It covers handling refrigerant only. Working on the equipment requires trade certification.
The compulsory trades that catch HVAC shops
Several of the trades an HVAC business relies on are compulsory in Ontario, meaning a person cannot legally work in them without a Certificate of Qualification, a Provisional Certificate of Qualification, or a Registered Training Agreement:
Refrigeration and Air Conditioning Systems Mechanic (313A)
Residential Air Conditioning Systems Mechanic (313D)
Sheet Metal Worker (308A)
Residential Low Rise Sheet Metal Installer (308R)
Steamfitter (307A)
That last group is worth attention if you fabricate or install ductwork, because 308A and 308R are frequently overlooked. Compulsory certificates carry a $60 plus HST annual renewal each.
And if you do electrical work for hire rather than simply connecting your own appliance, that falls under the ESA electrical contractor licence, which is a separate licence from anything TSSA issues.
Confirm the current compulsory trades list before relying on it. Designations do change and the consolidated list is not republished often.
Two peak seasons, two cash flow cycles
Most seasonal trades have one build and one drain. HVAC has two: cooling season and heating season, with soft shoulders in spring and late autumn.
That is easier than a single-season business in some ways and harder in others. Easier because the gaps are shorter. Harder because you carry inventory and staff for two different product mixes, and you have two separate periods where installation revenue drops while overhead does not.
What works:
Maintenance agreements sized to fill the shoulders, with visits deliberately scheduled into the soft months
Pre-season promotions that convert quiet-month capacity into booked work at a modest discount rather than idle time at full cost
Deposits on pre-season installs. Cash in during the shoulder, and outside the HST net until applied to an invoice
Reserving for the HST and tax bills generated by the peaks, which fall due in the troughs
Warranty callbacks
Callbacks are labour with no revenue, and in HVAC they cluster: the first cold night after a heating install, the first hot week after a cooling install.
Measure them. Callback hours as a percentage of installation hours, by technician and by equipment model. Two useful things come out of it. You find out which installers need support, and you find out whether a particular equipment line's margin survives its callback rate. Sometimes the cheaper unit is not cheaper.
Frequently asked questions
How should HVAC maintenance agreements be accounted for?
As deferred revenue. Payment received up front is a liability until the service is delivered, and revenue is recognized over the term of the agreement. Recording the full amount as revenue on receipt overstates profit in the month of sale and can accelerate corporate tax on income not yet earned.
What does TSSA contractor registration cost in Ontario?
Effective May 1, 2026, annual contractor registration is $506 for under 6 technicians, $886.50 for 6 to 10, and $1,964.50 for over 10. A gas technician certificate is $136 for the two-year term. Propane and liquid fuels have separate fee schedules.
Do I need both a gas technician certificate and a contractor registration?
Yes, they are separate requirements. Individuals need a certificate to work on gas appliances, and the business needs its own contractor registration. Each technical field, such as natural gas and propane, requires its own registration.
Is an ODP card enough to work on refrigeration equipment?
No. The Ozone Depletion Prevention certificate covers removing, handling and disposing of refrigerant only. Working on or repairing the equipment requires a Certificate of Qualification in the relevant trade. This is one of the most commonly misstated points in HVAC.
How long is an ODP certificate valid?
Five years from the date of issue. It is obtained by completing a one-day government-approved environmental awareness course with a minimum score of 75%, and course fees vary by provider.
Is Refrigeration and Air Conditioning Systems Mechanic a compulsory trade?
Yes, 313A is compulsory in Ontario, as are Residential Air Conditioning Systems Mechanic 313D, Sheet Metal Worker 308A, Residential Low Rise Sheet Metal Installer 308R and Steamfitter 307A.
Is a furnace in my warehouse an expense or inventory?
Inventory, until it is installed at a customer's premises. Equipment purchases should be coded to inventory rather than cost of sales, counted at year end, and written down where models are discontinued or superseded.
Is HST payable on a deposit for a pre-season installation?
Not when received. Under the Excise Tax Act a deposit, refundable or not, is not consideration for the supply until applied against the price. That is a genuine advantage for taking shoulder-season deposits on peak-season work.
Key takeaways
Maintenance agreements are deferred revenue. Booking them as income on receipt overstates profit and can pull tax forward
Equipment is inventory until installed. Count it, and write down superseded models
Individual TSSA certification and business contractor registration are two separate requirements, with separate fees
An ODP card covers handling refrigerant only. It is not authorisation to work on the equipment
313A, 313D, 308A, 308R and 307A are all compulsory trades with annual renewal costs
Two peak seasons means two cash flow troughs. Maintenance agreements and shoulder-season deposits are the structural fix
Talk to an accountant who works with HVAC contractors
SKG Financial handles corporate tax, bookkeeping, HST and payroll for HVAC and mechanical corporations across Mississauga, Oakville, Vaughan, Markham, King City, Caledon and Burlington. Deferred revenue on service agreements, equipment inventory and seasonal cash flow planning are routine work here. Deferred revenue on service agreements is the entry most HVAC companies get wrong. It is standard in how we do accounting for HVAC and trades.
Fixed fees quoted up front. Straight answers, no lecture.
References: TSSA, contractor registration and certification and published Natural Gas and Hydrogen fee schedule. Ontario, certificate to handle refrigerants and O. Reg. 463/10. Skilled Trades Ontario, Refrigeration and Air Conditioning Systems Mechanic. Fees current at July 2026 and repriced annually. General information only.
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