Deposit, down payment or retainer: what's the difference?

Your order form says “non-refundable deposit.” Your associate says “down payment.” Your designer's invoice says “retainer.” Those words describe different purposes, even when money eventually goes toward the same sofa.

A deposit secures an order under its terms. A down payment is the first part of the purchase price. A design retainer pays for the agreed design arrangement, such as reserved time or defined services; any credit toward furniture needs its own terms. Choose the wording by what the payment actually does.

General information, not legal or tax advice.

Which word belongs on the order?

Use a term consistently once you have defined the arrangement. Changing the label between the conversation, quote, and receipt makes the customer work out whether the deal changed too.

“Deposit” is usually a useful word for a furniture order when the payment is credited against that order. Follow the plan-by-plan deposit guide for the payment route; don't let the name of a button become the store's entire payment policy.

Keep the explanation as specific as the furniture. The linen may be “natural”; the payment terms should be rather less open to interpretation.

Can a deposit be non-refundable?

The answer depends on the agreement, the events, and the governing law. Printing “non-refundable” does not settle every dispute.

For example, New York's General Business Law § 396-u, in the text dated September 22, 2014, provides choices when covered furniture misses its stated delivery date, including refund or credit. Its definition expressly excludes articles substantially custom-made or custom-finished. That distinction matters in a furniture store; don't apply the example to every custom order.

Check with your attorney when settling cancellation wording and the circumstances in which a deposit can be retained. The custom-order cancellation guide goes deeper into the question.

What should the customer actually read?

Write the purpose, amount, balance, and due event in plain language, then connect them to the complete terms. Say an illustrative order totals $4,000, with a $1,000 deposit:

The $1,000 deposit is applied to your $4,000 order total. The remaining $3,000 is due before delivery. The cancellation and change terms supplied with this quote explain how those requests are handled.

That example is payment wording, not a complete cancellation clause. It doesn't declare when the store can retain money. Keep the full terms with the approved specification, particularly when vendor commitments and customer changes affect what happens next.

A deposit request is also different from a received payment. The customer can hold an unpaid link; your bookkeeper needs the receipt.

Do I charge sales tax on a deposit?

Tax treatment follows the jurisdiction and transaction, not the label alone. Indiana's Sales Tax Information Bulletin 78, effective on publication in November 2022, treats initial and interim layaway payments as deposits rather than individual taxable retail sales, with tax collected on final payment and transfer.

That is a layaway rule, not permission to apply the same treatment to every made-to-order payment. Have your CPA establish how your store's actual payment arrangement should be recorded and taxed, including the way its checkout collects money. The state-by-state deposit tax guide separates the examples.

Accounting asks another question: when has the store earned the sale? A furniture retailer's FY2025 annual report illustrates customer deposits carried as liabilities until delivery. Use the deposit bookkeeping guide to discuss your records without confusing cash received with revenue earned.

Should the design retainer become a furniture credit?

A purchase credit is a commercial choice that should be explained before the design work begins. State which services are covered, the purchase conditions for any credit, and whether unused credit expires or can be transferred.

Say the design fee in the example is $300 and the store offers a $300 credit on a qualifying furniture purchase. The service and the credit should remain understandable as separate entries. Don't silently turn the fee into an additional furniture deposit. The design-fee credit guide helps set that arrangement.

How does OrderPilot keep the payments straight?

On any Shopify plan, authorized staff can use Admin deposit orders before placement when the setting is enabled; each deposit has its own taxable Shopify order and pay link. Shopify's native percentage deposit terms, OrderPilot POS Take Deposit, placed-order partial manual payments, and minimum-deposit requirements need Shopify Plus.

For the example, request the $1,000 deposit and review the paid amount before collecting more. If another $500 arrives by check before placement, record it through the supported deposit-order flow. The remaining balance becomes $2,500. Keep the check record and the deposit receipt together. OrderPilot freezes the signed terms with the order and supports design time as a service line. The customer can see the agreed sale while your team follows the payment history. Choose the right deposit collection route before sending the request.

Sources

1. General Business Law § 396-u: Merchandise delivery — New York State Senate, text revision September 22, 2014.
2. Sales Tax Information Bulletin 78 — Indiana Department of Revenue, November 2022.
3. Annual report: customer deposits and revenue recognition — Bassett Furniture Industries, SEC filing, FY2025.
4. Creating draft orders — Shopify Help Center.