If you operate a restaurant or bar that serves alcohol, you can be certain that you will come face to face with one or more government auditors, about every four years.
Why? Provincial and federal tax authorities truly believe that under-reporting sales is rampant in the hospitality industry. Tax authorities are statute barred from reassessing returns more than four years old, in most jurisdictions. So, every few years, you can expect a visit from the provincial sales tax auditor, who will audit two to four years’ worth of sales returns during each visit. Canada Revenue Agency audits GST returns, but not nearly many or as often as the provincial authorities audit RST returns. Undoubtedly, this is because there are far more GST registrants than RST vendors, and the GST registrants are much larger tax collectors. However, with the coming harmonization of Ontario and BC sales taxes with the GST, both provinces’ licensed restaurants should expect a dramatic increase in sales tax audits (covering both taxes).