6 Taxes To Know If You Run A Restaurant In Canada

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    31 May 2023
      You’ve started a restaurant out of love for food. Amazing! Since it’s a for-profit business, you’ve also learnt the basics of restaurant bookkeeping. Excellent!  Even though the quality of service drives restaurants towards success, understanding the industry-specific taxes is the real thing that keeps their financial health in check. In this case, we mean all the taxes a restaurant establishment must bear if it conducts business in Canada.  If you own a restaurant or planning to open one, it is necessary for you to understand these 6 taxes that will be levied on your business income.  Read this guide on restaurant taxes and sail through the upcoming tax season easily!

    Food Tax

    Corporate Tax filing Surrey Canada In Canada, the law differentiates between food items prepared at a restaurant and food items brought at a grocery store. Cooked meals are taxed, and each province has a different rate. Also, all the items in a vending machine are taxed, even if they are otherwise zero-rated basic grocery items. 

    Spirits, Wine, Beer Tax (Alcohol Tax)

    Corporate Tax filing Canada If your restaurant serves alcohol or has a brewery/ winery attached to it, the business is subjected to this tax. The tax amount varies as per the type, percentage, and volume of the alcohol. Whether it was locally brewed or imported also plays a role in determining the tax rate.  Recently, there was an adjustment to the excise duty rates on spirits, wines, and beer. Consult corporate tax filing Surrey Canada services to adjust your business strategy accordingly!

    Payroll Taxes

    Corporate Planning & Compliance Canada Restaurants are a labour-intensive industry, and payroll taxes matter significantly in this field. Before issuing a salary, the employer has to make standard payroll deductions: Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and income tax from employees’ wages.  To get a better understanding of payroll deductions, it is advised to schedule an appointment with restaurant bookkeeping services in Canada. 

    Non-alcoholic Beverage Tax

    Business Planning Solution Canada Non Alcoholic drinks, such as carbonated drinks, non-carbonated beverages (juice, milk, etc), and everything else sold in a restaurant for consumption is subject to tax. Whether you own a restaurant, fast-food outlet, cafeteria, or coffee shop, you need to pay a tax on all non-alcoholic beverages. Check out the publication listed by CRA about the taxation of beverages in vending machines and different establishments for more information.

    GST/ HST

    In Canada, the sales tax is not included in the restaurant menu. It depends upon the province where your business is located. In most provinces, they either charge an HST (Harmonized Sales Tax) or a combination of GST (Goods & Service Tax), and PST (Provincial Sales Tax). Saskatchewan is the only province charging PST, and Quebec has its own sales tax (QST). For more information on sales taxes, talk to restaurant bookkeeping Canada service experts.

    Tax on Tips

    Are you aware that tips and gratuities are taxable, as they are considered income? Restaurants can choose whether they want to receive tips or not. However, it is customary in Canada.  Out of controlled, direct, and declared tips, the employees need to keep track of the controlled tips, especially because they are a part of the standard payroll deduction of employees. 

    Wrapping Up!

    No matter the business structure, when filing taxes, restaurant owners must be aware of the multiple types of taxes they will need to pay to the CRA. The restaurant’s business structure also comes into play. Depending on your restaurant’s location, and which province it works out of, certain taxes and tax rates may differ between your goods and services.  Tax planning for Canadian entrepreneurs can help them keep a significant chunk of their profits if professionals do it correctly. You can request a free consultation from bookkeeping services for restaurants in Canada like CJCPA to sort out your books following the tax regulations for your region.  At CJCPA, we are a team of experienced professionals assisting individuals, professionals, self-employed, and business firms with bookkeeping, business advisory services, taxation, accounting, and other related services. We provide our services across British Columbia, especially in Abbotsford, Surrey, Langley, New Westminster, and Burnaby.   
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