- This Pointer will help you if you sell alcoholic beverages in an establishment such as a restaurant, bar, pub, hotel, resort or as a caterer. It explains the basic Retail Sales Tax (RST) rules for your type of business. If you also sell prepared foods or charge for admissions, please refer to Small Business Pointer (SBP) 906 - Prepared Foods and SBP 909 - Admissions.
What are alcoholic beverages?
Alcoholic beverages include liquor, beer, wine, premixed cocktails, and alcoholic coolers. Businesses that sell alcoholic beverages often sell prepared foods too.
What are prepared foods?
Prepared foods are ready-to-eat foods bought from an eating establishment, and include take-out and eat-in service. Examples of prepared foods are meals, pizzas, sandwiches, hand-scooped ice cream, five or fewer pastries, and non-alcoholic hot or cold drinks.
Charging RST
Two RST rates may apply to your business. You charge RST at:
- 10 per cent on alcoholic beverages, sold at any price
- 8 per cent on prepared foods sold for more than $4.00 (excluding alcoholic beverages), and on snack foods such as candies, gum, chips, and pretzels.
When you sell prepared foods along with alcoholic beverages, show the two charges, and the related RST, separately on the customer's bill. For example:
| Chicken wings |
$5.00 |
| Salad |
3.00 |
| Food total |
$8.00 |
| Draft beer |
3.50 |
| Rum & coke |
4.00 |
| Alcohol total |
$7.50 |
| Subtotal |
15.50 |
| GST (5 per cent) |
0.78 |
| RST on food (8 per cent) |
0.64 |
| RST on alcohol (10 per cent) |
0.75 |
| Total bill |
$17.67 |
If you serve liquor and mix separately (not premixed) to your customer, you charge 10 per cent RST on the liquor and 8 per cent RST on the mix provided the charges are also shown separately on your customer's bill.
Can I use tax included pricing?
Tax-included pricing means that RST is included in your prices and you do not show RST separately. If you choose this method, you must use it consistently. You must also state on a sign or in your menus that the prices include the 8 per cent or 10 per cent RST. You can use this method:
- for all alcoholic beverages; and
- for prepared foods if the prices of all prepared foods are over $4.00.
How to calculate RST with tax included pricing
You calculate Retail Sales Tax (RST) on the sale price without the federal Goods and Services Tax (GST). If your prices include GST, use a factor, as described below, to determine the correct RST amount.
If your price includes both RST & GST and you do not state the actual RST included in each item, then multiply the total tax-included price by:
- 8/113 to arrive at the RST amount (8 per cent rate)
- 10/115 to arrive at the RST amouunt (10 per cent rate).
If your price includes both RST & GST and you state the actual RST included in each item, then multiply the actual RST amount included in the price by the number of items sold.
Example: If the RST amount included in the price of a beer is $0.40 and you sell 10 beers, the RST on the sale is $0.40 × 10 beers = $4.00.
If your price includes GST and you charge RST separately, then multiply the GST-included price by:
- 7.619 per cent for prepared foods over $4.20 ($4.00 + 5 per cent GST), and
- 9.524 per cent for all alcoholic beverages.
This method is the same as applying 8 per cent and 10 per cent RST on the GST-excluded prices. Do not show these factors on your customer's bill.
Gratuities
You may add a mandatory service or gratuity charge to your customer's bill in lieu of a gratuity that is normally paid at the discretion of your customer. RST is not payable on these charges provided they fall within percentages normally accepted by the industry, but should not exceed 20 per cent. These charges must be shown separately on your customer's bill.
On what do I pay RST?
You must pay RST on all taxable items that you purchase for own use in your business, such as drinking glasses, bar equipment and supplies to prepare food. If you give away free alcoholic beverages to anyone including yourself, you must pay 12 per cent RST on your cost of the alcoholic beverages. Report the RST on Line 3 of your RST return. For more information please see RST Guide 302 - Alcoholic Beverages for details. Instructions on how to complete your RST return are included with your return card.
What can I purchase without paying RST?
You do not pay RST on your purchase of items that you sell to your customers. These include alcohol and drink mixes, and disposable items that you use to serve drinks, such as straws and napkins. To claim an exemption from RST, you must give a valid Purchase Exemption Certificate (PEC) to your suppliers. For more information on PECs, please see RST Guide 204 - Purchase Exemption Certificates.
Liquor licences
You must have a liquor licence to sell alcoholic beverages. To obtain a liquor licence, you should register with the Alcohol and Gaming Commission of Ontario (AGCO). The AGCO can refuse to issue, renew or transfer a liquor licence if you have any past due RST returns or you owe RST to the Ontario Ministry of Finance. If this happens, call the Collections Branch (RCB) of the Ontario Ministry of Finance at 1 866 ONT-TAXS (1 866 668-8297).
Keeping records
You must keep all books and records to support your sales and purchases for at least seven years. Such records include detailed cash register tapes (X and Z tapes), guest checks, sales invoices and journals, purchase invoices and journals, bank records and financial statements.
More Information
The information contained in this publication is provided only as a guideline and is not intended to replace the legislation. Whether tax applies in your situation will depend on the specific facts involved. Please contact us if you have questions.
Telephone
- 1 866 ONT-TAXS (1 866 668-8297)
- 1 800 263-7776 for teletypewriter (TTY)
Written Interpretation
To obtain a written interpretation on a specific situation not addressed in this publication, please send your request in writing to:
Ministry of Finance
Advisory Services and Program Policy Branch
33 King Street West
Oshawa ON L1H 8H5
