Registering a BC restaurant for GST and PST: two taxes, two registrations

British Columbia does not have a single harmonized sales tax. The federal GST is run by the Canada Revenue Agency (CRA), and the provincial sales tax (PST) is run by the BC Ministry of Finance. A restaurant often needs both, and the two registrations follow different rules. Mixing them up is the commonest early mistake.

When must you register for GST?

The CRA's small supplier rule is the same across Canada. If your taxable revenue, before expenses, stays at or below 30,000 dollars over four consecutive calendar quarters, you are a small supplier and you do not have to register. The count includes worldwide taxable supplies, including zero-rated ones, from you and your associates. It leaves out financial services, sales of capital property and goodwill from selling a business.

You stop being a small supplier in one of two ways. If a single calendar quarter goes over 30,000 dollars, it happens on the sale that takes you over, and you must charge GST from that sale. If the total of the last four quarters goes over without any one quarter doing so, it happens at the end of the month after the quarter that passed the line. The CRA's examples give you 29 days from the effective date of registration to register.

You can also register voluntarily if you make taxable supplies in Canada. Many new restaurants do, because registered businesses can claim input tax credits on the GST they pay during a fit-out.

When must you register for PST?

PST is different, because it is not triggered by a revenue threshold in the same way. The Ministry says you must register to collect PST if you are located in BC and sell or lease taxable goods, or provide software or taxable services, in the ordinary course of your business in BC. Its list of taxable goods includes alcoholic beverages and soda beverages. That is what pulls a restaurant in: if you sell liquor, or canned or fountain soft drinks, you are selling taxable goods.

The Ministry adds that being required to register but not registering does not remove your duty to collect and remit. You are still treated as a collector.

What are the PST rates?

The Ministry of Finance's small business guide puts the general PST rate at 7 percent, which covers goods such as soda beverages, and liquor at 10 percent. Food itself and the way your bill is split are covered in GST, PST and liquor tax on restaurant sales.

Does PST work like GST on what you buy?

No. There are no PST input tax credits on goods a business buys. PST is payable on taxable goods you buy for use in the business unless an exemption applies, such as goods bought for resale. The next guide on PST on restaurant equipment and supplies shows how that works in a kitchen.

How long do you keep records?

The Ministry's guide says PST books and records must be kept for five years, and you need written permission to destroy them earlier. GST records are kept for six years from the end of the year they relate to, under the CRA's rules. If you are registered for both, keep the longer period for everything.

What if you are not sure which taxes apply to your menu?

Make a short list of every item you sell, and mark each as food, soft drink, liquor or other. The Ministry's registration page names alcoholic beverages and soda beverages as taxable goods, and its rate table puts liquor at 10 percent and soda at 7 percent. Take that list to your accountant, or ask the Ministry, before opening day. A till set up correctly from the start is far easier than one corrected after the first return.

A simple order of work

1. Track your quarterly sales against 30,000 dollars from your first day.
2. List what you sell: liquor, soft drinks and anything else taxable.
3. Register for PST before you sell liquor or soft drinks.
4. Register for GST by the date the CRA requires, or earlier if you want input tax credits.
5. Set up your till so each tax is a separate line.
6. Diary your filing dates, which differ for each tax.

If you are still planning your opening, the permits you need are in how to open a restaurant in BC. For payroll taxes, see BC's employer health tax.

More in the Canadian guides for food businesses.