PST and GST for BC restaurants: what to charge on food, alcohol, takeout and gift cards

British Columbia has two sales taxes, and they apply to a restaurant bill in different ways. Getting the till set up properly is the difference between a clean return and a nasty surprise at an audit. This guide summarizes the BC government and Canada Revenue Agency guidance. Confirm every rate and rule on their pages before you rely on them.

What tax do you charge on a restaurant meal in BC?

Two taxes sit on top of the menu price:

Item	GST	PST
Prepared food eaten in or taken away	5%	Generally none
Non-alcoholic drinks such as coffee or iced tea	5%	Generally none
Soda drinks	5%	Yes, carved out of the food exemption
Alcohol	5%	10%

The BC government's guidance for food and beverage service providers says meals, snacks and non-alcoholic hot or cold drinks such as coffee or iced tea are exempt from PST, while liquor carries 10 percent PST. The same guidance carves soda drinks, including fountain and vending drinks, out of the food exemption at 7 percent PST, so they are taxed differently from your coffee. Check the BC government's page for items such as bottled drinks, and set them up as their own class in your till.

Do you charge tax on tips and service charges?

A tip that a customer freely gives, such as cash left on the table, is not subject to GST. A mandatory gratuity or service charge you add to the bill is different: GST applies to it, but the BC government's PST bulletin says PST does not apply to mandatory gratuities. Be clear on your bill and menu which charges are voluntary, and ask your accountant if you add a service fee.

What do you charge on takeout and delivery?

The tax follows the item, not the spot where it is eaten. Takeout food carries GST, and a delivery fee you charge may also carry tax. Check the details for each channel with your accountant.

Do you have to register for GST?

The Canada Revenue Agency treats a business as a small supplier, which need not register, until its taxable revenues pass 30,000 dollars in a single calendar quarter or over four consecutive calendar quarters. Once you pass the limit you must register within 29 days of the supply that took you over. You can register voluntarily before then to claim input tax credits on your startup costs. If you register, you collect GST from your customers, claim credits on the GST you pay to suppliers, and file returns on the schedule the Canada Revenue Agency sets for you.

What about PST?

If you sell alcohol, you generally register to collect PST with the provincial government. Your liquor supplier charges you for the product, and you charge PST on the sale. Use a point-of-sale system that applies the right tax to each line, so that a bill with food and wine shows GST on both and PST only on the wine.

What input tax credit rules apply to food and drink you buy?

Federal rules limit the input tax credit on some food, beverage and entertainment expenses. Food you buy for resale to customers is a different category from staff meals and entertainment for staff or clients. Ask your accountant, or check the CRA's guidance, for the current limit and its exceptions, and keep receipts and notes on the purpose of each expense.

How should you handle gift cards?

Under the CRA's policy statement on gift certificates, selling a gift card for money is not a taxable supply, and tax applies when the card is redeemed against food or drink. Treat the sale as a liability, and apply tax at redemption. If your system cannot split a payment between a gift card and another method, check how it records the tax.

What records should you keep?

• Daily sales reports split by food and alcohol
• Supplier invoices showing GST paid
• PST returns and payments
• Records of gift card sales and redemptions
• A written note of any change to your tax settings, with the date

The CRA says you usually must keep GST/HST records for six years from the end of the year they relate to, and it can ask you to keep them longer. Do not destroy records early without its written approval.

What are the common mistakes?

1. Charging PST on food, or missing it on a soda drink.
2. Forgetting PST on a bottle of wine added to a food order.
3. Not updating the till when rates change.
4. Treating a mandatory service charge as a tip.
5. Missing the voluntary registration window.

A good habit

Once a quarter, print a sample bill with food and alcohol and check it by hand. If the maths does not match your understanding, fix the till before it affects a return.

More guides for your business:

• The Accessible BC Act and your restaurant website: what applies today and what to do anyway
• Preparing for a BC health inspection: what environmental health officers check and how to keep records ready
• Tip pooling in BC restaurants: what the Employment Standards Act lets you do with gratuities

More in the Canadian guides for food businesses.