Coffee shops, restaurants and “Ontario’s Food Tax”. Collecting the right amount of tax “will” improve your bottom line.

 At the “point of sale” purchasing prepared food in Ontario constitutes an 8% PST rebate toward the 13% HST if the subtotal is $4.00 or under.

In short; Ontarian’s and guests to our province pay only 5% tax in Ontario on coffee and food totalling $4.00 and under.  Whether eat in or take out.

Reducing tax paid on prepared food and eligible beverages can increase a coffee business’ bottom line.  How?  Let’s explain.

 Most of us only look at the “final price paid” on our receipts for a  single coffee at the register (including tax).  So let’s set our final price including tax to $1.50 for a coffee.

A single coffee taxed properly should be $1.43 (higher – selling price) + 5% (7¢ HST) payable = $1.50

Compare: taxing that coffee at 13% HST without implementing the Ontario Food Tax rebate of 8%.  Keeping the final total including tax to $1.50.

Single coffee priced at $1.33 (lower – selling price) + 13% (17¢ HST) = $1.50

As you see setting up your POS correctly nets your business an extra 10¢ every coffee sold at $1.50 (tax included).  You can collect and remit the higher tax or you can adjust your own selling price, apply the Ontario 8% rebate and keep the extra revenue.  It’s all above board; your choice.

For more information please visit the following link to Canadian Revenue Agency.

http://www.cra-arc.gc.ca/E/pub/gi/gi-064/

Near 25 years experience maintaining POS solutions.

We offer “solutions that count”.

Have a Great day!

This article has 1 comment

  1. If i buy 2 coffees at 1.95 i dont pay tax but if i buy 3 i pay tax. Obviously the three coffees are for three people so why the tax on coffee. It seems pretty silly for each person to have to stand inline just to avoid the tax rule. What about the people that get sent on a coffee run by there boss to buy x number of coffee for the staff. Its still on coffee per person. Are the coffee shops submitting the extra tax i doubt it. Get the rule straight no tax on beverages under 4.00 weather you are picking up one or 10.

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