HST on restaurant meals in Ontario: 13 percent, the 4 dollar rebate and input tax credits

Sales tax is not your money, but it flows through your till every day, and mistakes are expensive. In Ontario, restaurants collect the Harmonized Sales Tax, HST, on meals and drinks. The Canada Revenue Agency administers it. This guide covers where owners trip up. It is general information, so confirm each point on the CRA and Ontario government pages, and ask your accountant about your own case.

What is the HST rate in Ontario?

13 percent, made up of a federal part of 5 percent and an Ontario part of 8 percent. It applies to prepared meals, takeout, drinks and most restaurant sales. Unlike British Columbia, where food carries only GST and alcohol carries extra PST, Ontario applies the same HST to most items on the bill, alcohol included.

What is the small-item rebate?

The government provides a point-of-sale rebate of the provincial part of the HST on qualifying prepared food and beverages. The test is the total price, before HST, of all the qualifying prepared food and beverages sold to one person at one time: if it is 4 dollars or less, those items carry only the federal 5 percent. Other goods in the same sale are ignored when applying the 4 dollar limit. The rebate is given at the till by not charging the 8 percent, and the CRA information sheet GI-064 lists which items qualify. Alcohol does not qualify. Make sure your till applies the rebate on the total of qualifying items for each customer, not item by item, and keep a record of the qualifying sales.

Do you have to register for GST/HST?

A business whose taxable supplies over four consecutive quarters are 30,000 dollars or less is generally a small supplier and does not have to register. You can register voluntarily before then to claim input tax credits on startup costs. Once registered, you collect HST, file returns on the schedule the CRA assigns and remit what you owe.

What can you claim back?

You claim input tax credits on the HST you pay for things used in your business: food and drink for resale, packaging, equipment, rent if it carries HST and many services. There is a special limit: the credit for food, beverages and entertainment you buy is generally restricted to 50 percent. The CRA's page on calculating input tax credits explains the two ways to claim it. Food you buy to sell to customers is a different category and is not limited that way. Staff parties, client meals and entertainment are where the limit applies. Keep receipts with a note of purpose.

How should you handle tips and service charges?

A tip a customer gives freely, such as cash not recorded on the bill, is not subject to HST. If you add a mandatory or suggested amount to the bill as a service charge, you must charge HST on it, as the CRA explains. If you add a service charge for large parties, show it separately, apply HST correctly and be clear whether it goes to staff. The Ontario tip law covers what you can do with gratuities, and is the subject of a separate guide.

What about takeout, catering and delivery?

HST generally applies to takeout and catering. If you deliver in your own vehicle and charge a fee, the fee may carry HST. For delivery through a platform, the platform's agreement determines who collects the tax on its fees, so read it. Catering for a private function in a hall may include other charges, such as equipment hire, that carry tax.

How do gift cards work?

Selling a gift card is generally not a taxable supply at the time, and tax is charged when the card is redeemed against food or drink. Make sure your point-of-sale system treats a gift card as a payment method and applies the tax to the meal.

What records do you need?

• Daily sales reports by tax type
• Invoices from suppliers showing HST
• Returns and payments
• Records of rebate-qualifying sales
• Notes on any change in your tax settings

Keep them for the period the law requires, generally six years.

Which mistakes cost owners most?

1. Charging 13 percent on a customer's qualifying items when their total is 4 dollars or less.
2. Claiming a full credit on staff meals.
3. Missing a filing date.
4. Treating a mandatory service charge as a tip.
5. Not checking a till update after a rate change.

A good habit

Once a quarter, run a test bill with a rebate item, a regular item and a tip, and check the tax by hand.

More guides for your business:

• AODA website rules for Ontario restaurants: who must meet WCAG 2.0 AA and what to fix first
• Calorie labelling on Ontario menus: which businesses must post calories and how to comply
• Ontario minimum wage from 1 October 2026: 17.95 dollars, no lower rate for servers and what to recalculate

More in the Canadian guides for food businesses.