It was kind of fun trying to come up with a decent headline for today’s article. Tips are in the news a lot, lately. Servers, and others who receive tips, don’t like handing out a portion of their tips to other co-workers and especially not to the “house” (management). Now, we find that they don’t like “tipping out” to the big house, either! It’s not like we didn’t know this, but apparently, the CRA is just starting to take notice!
Archive for the ‘Restaurant Operations’ Category
Posted in Canada Revenue Agency, Income taxes, Restaurant Operations, Taxes, tagged Canada Revenue Agency, CRA, Income tax, personal income tax, Restaurant Operations, Source Deductions, Taxes, tips and gratuities on May 29, 2012| 3 Comments »
If your restaurant pools or shares tips, charges automatic gratuities, or receives a tip-out “to the house”, this article could save you thousands of dollars.
If you’re like most restaurateurs, you probably think that the Canada Revenue Agency’s only concern about tips and gratuities is that servers report them on their personal income tax returns. While the CRA is concerned about this, now, they are even more interested in restaurants that fail to report certain types of tips.
The CRA’s policy on tips and gratuities can be found here. The rest of this article may shock you.
Most restaurateurs know they lose the cost of the pilfered product, but few understand that they may be responsible for the sales and income taxes (plus penalties and interest) that would have been incurred had the stolen product been sold. Significant tax liabilities often arise from sales (and income) tax audits of restaurants and bars. This can occur anytime purchased wine, beer and liquor is not sold, and one of the most common (and largest) causes of these items not being sold is theft and fraud.