Restaurants who charge tax during holiday break could get investigated by CRA: industry expert

An image of a group of friends eating dinner out at a restaurant. (Pexels/Helena Lopes)

Restaurants who fail to honour the holiday tax break could be investigated by the Canada Revenue Tax Agency, according to the Ontario Restaurant Hotel and Motel Association.

Unionville resident Vicky Hui went out to a restaurant with a group of friends for a birthday last Saturday – the same day the GST and HST holiday started – and was surprised when they were asked to pay tax on their meal.

They caught me by a huge surprise and the waitress said it was her first time hearing about it," Unionville-resident Vicky Hui told CTV News Toronto.

Hui said her restaurant bill came to $349.95 for a group of seven people, including a $40.20 surcharge for harmonized sales tax (HST) – thought he restaurant was not supposed to collect it.

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“My case was not handled well because my complaint was not handled in a professional manner. The waitress was not aware of the policy and the manager jumped to a conclusion quickly and just told us to pay,” Hui said.

CTV News is not naming the restaurant in question as they provided a full refund of the HST, an apology and a $75 gift card to Hui and her group.

Under tax break, until Feb. 15, tax will be waived on prepared foods, restaurant meals, some snacks and select alcoholic beverages.

“It’s a great idea, but confusing and (causing) frustration for many in hospitality organizations,” Tony Elenis, CEO and President of the Ontario Hotel and Motel Association, said.

Elenis says any restaurant that collects tax over the next two months could be investigated by the Canada Revenue Agency.

“If a business doesn’t comply and charges the GST and HST, and it’s discovered they could be investigated by the CRA for non-compliance,” Elenis said.

A spokesperson from Restaurants Canada confirmed to CTV News Toronto that the CRA clarified Bill C-78 received royal assent, and that businesses “should not charge GST/HST on qualifying goods and services.”

“CRA expects suppliers to make business decisions on how best to ensure compliance with the legislation regarding whether a particular qualifying supply is made during the eligible period. This will involve deciding how to determine when a recipient will make the payment in respect of the supply as this impacts the potential application of GST/HST relief,” the statement reads.

“For example, if a supply is delivered from a manufacturer (e.g. bottler) to a retailer (e.g. grocer) during the holiday period, but not invoiced or payment is not due/made until after the period, it would not get the zero-rated treatment. In such situations, retailers and consumers who have been incorrectly charged and invoiced GST/HST for zero-rated supplies made during the temporary measure may claim for a rebate for tax paid in error through the GST 189 – General Application for GST/HST Rebates.”

Any business that makes an effort to comply with the temporary legislation will “not be the focus of our compliance actions,” the statement reads, as the CRA will focus their attentions on who is “willfully and egregiously” refusing to comply with the temporary measures.

“With this in mind, we advise restaurants to offer the GST and HST holiday,” Restaurants Canada said.

Hui said she is satisfied with the outcome of her case, but wanted others to know restaurants should not be collecting taxes over the next two months.

“They did their best to make it right and offer a settlement in the end,” Hui said.

There were complaints food delivery services were still charging tax on food. But, UberEats said while customers will not be charged tax on groceries and restaurant orders, they will still be required to pay tax on delivery and service fees.