Ever since Canada announced the GST/HST tax break holiday in November, there’s been some discussion among Canadian restaurants, caterers, and customers about which products are eligible under the tax holiday.
Social media platforms are sprinkled with questions from business owners and customers alike, who have been wondering whether this means there will be no tax on all alcoholic beverages, delivery app orders and catering services.
Although the new legislation may have caused some initial confusion about what types of products are eligible, many restaurants are now feeling a bit more confident about how to navigate the temporary tax break.
According to Machael Shaikh, general manager of Mildred’s Temple Kitchen, the information they received from Restaurants Canada and the LCBO was clear and straightforward.
“There wasn’t much confusion on our end,” Shaikh told blogTO. “We just had to review the documents.”
And to notify their customers about the tax break, the restaurant even created “good-to-know” cards placed at each table to help customers understand how the new changes will affect their bills.
“Some customers didn’t even know there was a tax break,” Shaikh said, although he added that people were excited about the prospect of saving money once they learned about the changes.
A spokesperson at the Drake Hotel also echoed this sentiment, noting that only some people have expressed curiosity about the legislation.
“It hasn’t caused major challenges — most are happy to take advantage of the savings,” the spokesperson said.
With that being said, if you’re still unsure about the details of the tax break, here’s what you need to know about what products the tax relief covers at restaurants, food establishments, and food delivery apps.
Overview of GST/HST break
The federal government passed legislation to implement a temporary GST/HST break for a wide range of everyday essentials that has been in effect since December 14 and will last until February 15, 2025.
The tax break applies to several categories of products, including children’s clothing and footwear, children’s diapers, books, Christmas trees and other seasonal decorations, jigsaw puzzles, and most food and beverages.
Restaurants and bars
Much of the new legislation’s confusion involves the rules pertaining to restaurants and bars.
Food and drinks are tax-exempt when they are served at restaurants, pubs, bars, food trucks, and other establishments. When you dine out, you should see no tax on your bill unless you order a certain type of cocktail or mixed drink.
Specifically, there’s no tax on beer, wine, cider and sake that is 22.9% alcohol by volume (ABV) or less. There’s also no tax on spirit coolers or premixed drinks that are 7% ABV or less.
Where things get tricky is that most cocktails or hard liquor are subject to tax. If you order a martini or negroni or a shot of tequila, expect to pay tax on this purchase.
However, if you order a mixed drink made with sparkling wine like a mimosa, you won’t be charged tax. There’s also no tax on mixed drinks made with beer like micheladas.
So, if you’re eating out a restaurant over the next couple of months you could still see a small amount of tax on your bill if you happen to order an alcoholic drink that doesn’t qualify for the exempt status.
Food delivery
It seems that delivery apps have created some confusion when it comes to these temporary tax rules because the government still requires tax to be charged on the delivery service itself even if the food and drinks being ordered are tax exempt.
The reason for this is because when you order through a platform like Uber Eats or DoorDash, two separate transactions occur. First, the meal is provided by the restaurant to the customer, and second, the delivery service is provided by the platform provider to the customer.
Essentially, the meal provided by the restaurant to the customer is not taxed, but the delivery service provided by the platform is taxed.
Catering services
In general, you should not expect to be charged tax on catering services if you’re ordering from a typical catering company that is cooking and preparing a meal and drinks for you to eat and drink, except for tax on some of the alcoholic beverage types described earlier.
If the caterer is providing other services that involve admission charges, facilities hosting fees, fees for musicians, DJs, entertainers, and chef services where the food is prepared and served by a chef, but the ingredients to make the meal are not provided by them then tax will be applied to these extra services.