A while back, I wrote an article about tax auditors not knowing your business. In today’s post, we will look at the CRA’s appeal department’s knowledge of the restaurant business. I wish I could say that Appeals Officers are better equipped to deal with restaurant tax audit issues, but I can’t. Continue reading “CRA Appeals Officers Don’t Know Your Business”
A restaurateur approached me just after he had received notice that his bar was going to be reassessed for HST on unreported sales. This was a fairly typical situation that many bar and restaurants find themselves in after an audit. There is always a way to “fight” or appeal these cases, at least in part. So, I took the case. Continue reading “Another Tax Appeal Home Run”
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!
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.
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.
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.
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.
So, what do we care about U.S. tax audits? Plenty. What happens in the U.S. (and abroad) tends to happen in Canada, too.
Recently, the New York State Department of Taxation and Finance hired 300 additional auditors in an effort to generate an additional $200 million of sales tax revenue. While they say they’re just trying to make the system fair for all taxpayers, the reality is that auditors are becoming increasingly aggressive, and restaurants are high on the list of their targets.
As described in a recent article, Mark Supples, the owner of Mother’s restaurant in Allentown, spent five years and more than $150,000 fighting the state over claims that he owed more than $535,000 in sales taxes. He commented, “They come in with the attitude that we’re automatically guilty, that we’re criminals, and that it’s just a question of how much we’ve stolen.”
Huh? Do you mean that if I never over-pour drinks, my establishment can still be accused of under-reporting my sales (and taxes) during an audit? That can’t be right! Can it? Unfortunately, it IS true for almost every restaurant and bar in Canada! Today’s post explains how this happens and what you can do about it.
Most restaurants and bars use shot glasses or portion control pourers to accurately measure the amount of liquor that goes into cocktails, mixed drinks and shots. Meticulously training bartenders and monitoring pouring, you’re fairly confident that your pouring is fairly accurate, if not “perfect”. Even if it is, your establishment will be over-pouring all of your liquor drinks by at least 4%!
Despite what has been published in the press and disclosed by the CRA and the Ministry of Revenue Quebec (MRQ), the use of zappers has not reached epidemic proportions in the restaurant industry. Zappers have been around since the mid-1990s, though most of the usage seems to have been confined to Quebec. In fact, the vast majority of the convictions for sales tax evasion have occurred in Quebec. For background on the use and abuse of zappers, please read this, this, and this. The unfortunate thing about all of this attention is that it may draw our attention away from a far larger threat to our operations. The indirect audit approach.