Filing your HST return as an Ontario restaurant: due dates, instalments and input tax credits

Collecting HST is only half of the job. The other half is a return that reaches the Canada Revenue Agency (CRA) on time, with every input tax credit you are owed. A restaurant that gets the schedule wrong pays a penalty for the privilege of lending the government its money.

How often does a restaurant file GST/HST?

The CRA assigns your reporting period from your annual taxable supplies, as set out in its guide for registrants (RC4022):

Annual taxable supplies	Assigned period	Your options
1,500,000 dollars or less	Annual	You can choose monthly or quarterly
Over 1,500,000 up to 6,000,000 dollars	Quarterly	You can choose monthly
Over 6,000,000 dollars	Monthly	None

Most independent restaurants are annual filers. A monthly filer sees a refund sooner when HST paid on a big purchase is more than HST collected, so some owners with heavy equipment spending choose it voluntarily.

When is the return due?

Monthly and quarterly filers file and remit no later than one month after the end of the reporting period. A quarterly return for October to December, for example, is due on 31 January. Annual filers generally file and remit within three months after the fiscal year-end. A sole proprietor with a 31 December year-end is the exception: payment is due 30 April and the return 15 June.

Do annual filers pay during the year?

If an annual filer's net tax was 3,000 dollars or more in both the previous and the current fiscal year, the CRA requires quarterly instalments. Each is due one month after the end of the fiscal quarter, and is usually one quarter of last year's net tax, or an estimate of this year's. For a 31 December year-end, that means 30 April, 31 July, 31 October and 31 January. Net tax below 3,000 dollars generally means no instalments.

What does a late return cost?

The failure-to-file penalty is 1 percent of the amount owing, plus 25 percent of that 1 percent for each full month the return is late, to a maximum of 12 months. No penalty applies if the return shows nothing owing or a refund. Interest runs on top of the amount owing, so file on time even when you cannot pay in full.

How do input tax credits work?

Net tax is the HST you collected minus the input tax credits (ITCs) you can claim. A worked example: you collect 13,000 dollars of HST on 100,000 dollars of sales and paid 4,200 dollars of HST on food, supplies, rent and services. You remit 8,800 dollars. Keep the invoice for each credit, with the supplier's registration number where the amount requires it.

Most registrants can claim an ITC on a return filed by the due date of the last reporting period ending within four years after the period in which the credit could first be claimed. Do not rely on the full four years, though. Claim in the period the expense happened.

What is the 50 percent meal limit?

Where the income tax deduction for a meal or entertainment expense is limited to 50 percent, the ITC is limited to 50 percent too. This covers meals and entertainment you pay for as an expense, such as a client lunch or a staff party. Ingredients you buy to cook and sell are stock, not an entertainment expense. Ask your accountant how the limit applies to staff meals.

How long do you keep records?

Keep sales and purchase invoices and related records for six years from the end of the year they relate to. You need the CRA's written approval to destroy them sooner.

What should you do now?

1. Find your assigned reporting period on your CRA account.
2. Put every due date in your calendar a week early.
3. Set aside HST each week in a separate account.
4. File a nil return if you made no taxable sales.

For how the tax applies on a bill, read HST on restaurant meals in Ontario, and for the threshold that starts all of this, the 30,000 dollar small supplier rule. Gift cards have their own tax treatment in gift card sales and GST/HST for restaurants.

More in the Canadian guides for food businesses.