The 4 dollar HST rebate on small food and drink sales: how Ontario restaurants set it up at the till

A 3 dollar muffin and a coffee, or a 2 dollar cookie. Ontario treats many small food purchases differently from a full meal, and a till that does not know the rule overcharges the customer by 8 percent on every one of them. The Canada Revenue Agency (CRA) explains it in GST/HST Info Sheet GI-064.

What is the point-of-sale rebate?

HST in Ontario is 13 percent: 5 percent federal and 8 percent provincial. The rebate covers the 8 percent provincial part on qualifying prepared food and beverages. A registered supplier that gives the rebate at the point of sale charges only the 5 percent federal part. The CRA describes it as open to all recipients of qualifying prepared food and beverages sold in Ontario.

What is the 4 dollar test?

The total price, before HST, of all the qualifying items sold to one person at one time must be no more than 4 dollars. Items that do not qualify are ignored when you apply the limit. So a customer who buys a 3 dollar salad and a 10 dollar bottle of wine has a qualifying total of 3 dollars, and the salad gets the rebate.

Two limits follow from the wording. The test is on the total of qualifying items sold to one person at a time, not item by item. And if that total is over 4 dollars, the rebate does not apply to any of it.

Which items qualify?

Under GI-064, the qualifying list includes:

• food or drink heated for consumption
• salads, unless canned or vacuum sealed
• sandwiches and similar products, unless frozen
• platters of cheese, cold cuts, fruit, vegetables or other prepared arrangements
• bakery items such as muffins, cakes, pies and cookies that are not prepackaged and are sold as single servings in quantities under six
• ice cream and similar frozen desserts sold as single servings, not prepackaged
• non-carbonated beverages dispensed where they are sold
• milk, plant-based milk substitutes and certain fruit juice drinks with at least 25 percent natural juice by volume

Some items qualify only when sold with another qualifying item, such as carbonated drinks dispensed on site and some prepackaged snacks, subject to conditions listed in the info sheet.

What does not qualify?

Wine, spirits, beer and other alcoholic drinks never qualify. The CRA's own example shows a 3 dollar bottle of soda and a bag of chips sold together as not qualifying, so the full 13 percent applies.

How does the maths work?

On a 4 dollar sale of qualifying items, the rebate is 32 cents (8 percent of 4 dollars) and the net HST is 20 cents (5 percent of 4 dollars). A 3.50 dollar prepared salad carries 5 percent HST only. Show the tax on the receipt the way GI-064 allows: the HST and the rebate separately, the net HST, or the price including net 5 percent HST. Keep your invoicing and return requirements in line with CRA Guide RC4022.

How should you set up your till?

1. Tag every menu item as qualifying, non-qualifying or alcohol.
2. Make the till total qualifying items per customer and per transaction, then decide the rate.
3. Handle split orders with care. The rule looks at what one person buys at one time, so do not split a single customer's order into several small bills.
4. Test with a coffee and a muffin, a salad with a bottle of wine, and a soda with chips.
5. Keep a report of rebate-qualifying sales for your return.

What if you did not give the rebate?

The CRA says a customer can claim it back using form GST189 within four years. A customer should not have to, so correct the till and refund customers who ask.

A caution on dates

GI-064 is dated July 2010. Check the CRA's current page before you change your till settings, and ask your accountant if a rule has moved. The wider tax picture is in HST on restaurant meals in Ontario, and the filing side is in filing your HST return. If you also sell tips and service charges, see GST/HST on tips and service charges.

More in the Canadian guides for food businesses.