Taxing Tips

It was kind of fun trying to come up with a decent headline for today’s article.  Tips are in the news a lot, lately.  Servers, and others who receive tips, don’t like handing out a portion of their tips to other co-workers and especially not to the “house” (management).  Now, we find that they don’t like “tipping out” to the big house, either!  It’s not like we didn’t know this, but apparently, the CRA is just starting to take notice!

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Percentage Discounts

A few months ago, Dining Date Night began offering customers a 30% discount at various restaurants in Toronto.  In order to get the discount, a customer books a reservation on a website and pays a $10 fee to Dining Date Night.  When the customer visits the restaurant, 30% of the total bill (before taxes) is deducted as a discount.  This type of promotion is relatively good for both the consumer and the restaurant that provides the discount, because the restaurant can restrict the hours when reservations may be taken.

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Groupon Taxes

I’ve written a couple of articles about Groupon on my sister blog, Canadian Restaurateur.  This is part of a series that will cover accounting for Groupon certificates, setting up your Point of Sale (POS) system to properly track coupons and discounts, using QuickBooks to enter Groupon transactions, examining the tax treatment of Groupon certificates (this one), and finally, determining whether your restaurant should consider Groupon.

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Proving Automobile Business Use

Many restaurant owners use their automobiles for picking up supplies for the business, researching other restaurants, and making trips related to the restaurant’s operations. In Canada, individuals are able to claim a reasonable portion of their automobile expenses against their employment income from the business.  Even if you don’t draw a salary, you’re still considered an employee, by being a director of the company.

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Tips on Tipping Policies

If  your restaurant pools or shares tips, charges automatic gratuities, or receives a tip-out “to the house”, this article could save you thousands of dollars.

If you’re like most restaurateurs, you probably think that the Canada Revenue Agency’s only concern about tips and gratuities is that servers report them on their personal income tax returns.  While the CRA is concerned about this, now, they are even more interested in restaurants that fail to report certain types of tips.

The CRA’s policy on tips and gratuities can be found here.  The rest of this article may shock you.

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Taxing Theft

We all know that some amount of alcohol will be pilfered.  Don’t you love that word?  Pilfered.  Sounds like a mere pittance.  It is anything but.  As a rule of thumb, the cost of the theft will be about three times the cost of the alcohol that is, ah, pilfered.

If you’ve been following recent posts on my sister blog, Canadian Restaurateur, you may have noticed a theme. Theft.  All restaurateurs know that theft is a significant issue that requires our constant vigilance.  The cost of the stolen product is bad enough, but if you also have to pay tax (plus penalties and interest) on the retail value of the stolen product,  it becomes a huge issue.  Everyone knows it isn’t right that a restaurateur should have to pay tax “as if” the stolen alcohol had been sold. Unfortunately, that isn’t the way it works in most tax jurisdictions.

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Disproving Audit Assumptions

During a typical audit, the tax auditor interviews the taxpayer about the business operations and various factors that influence sales, such as portion standards, selling prices, theft, spillage, own-use and over-pouring.  If the auditor exercises sound judgment, the taxpayer’s assertions will be considered prima facie evidence that the assumptions are reasonable in the circumstances.  These assumptions form the basis for most audit assessments of restaurants and bars.  What if they’re just plain wrong?

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