GST/HST for Restaurants & Food Industry 2026

Navigate Canada's sales tax maze like a pro — from dine-in to delivery, tips to takeout

Running a restaurant in Canada? Then you know the drill — between staffing, inventory, and keeping customers happy, you've got enough on your plate. But here's the thing: get your GST/HST wrong and you're leaving money on the table (or worse, facing a CRA audit). In 2026, with digital delivery platforms and hybrid service models, the tax landscape's more complicated than ever. Don't worry, we'll help you sort it out, eh?

Quick Answer

Restaurants must charge GST/HST on most food and beverages at the rate applicable in their province (5% to 15%). However, basic groceries for off-site consumption are zero-rated. The key distinction? Where and how the food is consumed. You'll collect tax at the point-of-sale, file regular returns, and can claim input tax credits (ITCs) on business expenses. Under the small supplier threshold, you might not need to register if you earn under $30,000 annually.

Table of content

The Big Three: Taxable, Zero-Rated & Exempt Supplies
Input Tax Credits: Your Best Friend
Tips, Gratuities & Delivery: The Tricky Bits
Common Pitfalls That'll Cost You
Frequently Asked Questions

The Big Three: Taxable, Zero-Rated & Exempt Supplies

Here's where most restaurant owners get tripped up. Not all food is taxed equally under Canada's GST/HST system. Let's break down the difference so you can charge correctly and maximize your input tax credits.

Taxable Supplies (5%-15%)

Dine-in meals, hot takeout, carbonated beverages, alcohol, and meal kits. Charge full GST/HST rate based on place of supply rules.

Zero-Rated (0%)

Basic groceries for off-site consumption: milk, bread, fresh veggies, uncooked meat. You don't charge tax but can still claim ITCs.

Exempt Supplies

Employee meals, certain fundraising events. No tax charged, but you cannot claim ITCs on related costs — big difference from zero-rated!

Related: Claim GST HST Expenses

Mixed Suppliers

Most restaurants fall here — selling both taxable and zero-rated items. You must track ITCs separately using the simplified or direct method.

Input Tax Credits: Your Best Friend

Think of ITCs as free money you're probably leaving on the table. For every dollar of GST/HST you pay on business expenses — from kitchen equipment to that double-double you bought for staff meetings — you can claim it back. The catch? You need proper documentation and must be a registrant engaged in commercial activity.

Track all receipts showing GST/HST paid
Claim ITCs on capital property, operating expenses, and inventory
Use the simplified method if under $1M in taxable sales
Remember: you can't claim ITCs on exempt supplies or personal expenses

Pro tip: If you're using the quick method for small businesses, you still claim ITCs on capital purchases. Run the numbers to see if the quick method saves you more than claiming full ITCs.

Tips, Gratuities & Delivery: The Tricky Bits

Here's where the CRA gets picky. Mandatory service charges? Taxable. Voluntary tips left for staff? Not taxable if passed directly to employees. Third-party delivery fees? Depends on who's actually supplying the food.

Delivery Platform Dilemma

If Skip or Uber Eats acts as your agent, you charge GST/HST. If they're the principal (buying from you and reselling), they handle the tax. Check your contract — most platforms now make you the supplier, meaning you're on the hook for collecting and remitting tax on the full meal price.

For 2026, with digital platform operators required to register for GST/HST, the landscape's shifting. Keep an eye on your platform agreements and invoicing requirements to stay compliant.

Common Pitfalls That'll Cost You

CRA auditors love restaurants — too many make these same mistakes. Don't be that owner.

Related: GST HST Audit

Mixing personal and business expenses (no, your family dinner isn't an ITC)
Forgetting to charge tax on catering deposits and cancellation fees
Not adjusting ITCs when you give free meals to staff (that's a taxable benefit)
Using the wrong place of supply rules for interprovincial catering
Failing to register when you cross the $30,000 small supplier threshold

Need to Calculate Your Tax Remittance?

Get your numbers right the first time with our sales tax calculator

Calculate My GST/HST

Essential Tax Filing Resources

Make sure you're using the right tools and information to file correctly:

Complete Tax Filing Guide | Best Tax Software | NETFILE Information

Frequently Asked Questions

Do I charge GST/HST on coffee and donuts at my café?

Yes, if they're hot and ready-to-eat. Hot beverages and pastries sold for immediate consumption are taxable at the full rate. But sell those same donuts cold in a dozen-pack for take-home, and they become zero-rated basic groceries. The temperature and intent matter more than you'd think!

How do I handle GST/HST for meal kit subscriptions?

Meal kits are generally taxable as prepared meals, even if ingredients require cooking. The CRA views them as value-added products, not basic groceries. Charge GST/HST on the full subscription price, including delivery fees, at the rate applicable where the customer receives the kit.

Can I claim ITCs on alcohol purchases for my restaurant?

Absolutely! Alcohol is 100% taxable, so you can claim full input tax credits on all liquor purchases, wine, beer, and spirits bought for resale. Just ensure you have proper invoices showing your business name and GST/HST number. Keep those receipts organized — they add up fast.

What's the difference between zero-rated and exempt supplies?

Huge difference! Zero-rated means you charge 0% GST/HST but can still claim input tax credits on related costs (like basic groceries). Exempt means no tax charged and no ITCs allowed (like free staff meals). One saves you money; the other can cost you if you're not careful.

Related: GST/HST and Capital Assets

Should I use the Quick Method or regular GST/HST filing?

If you have under $400,000 in taxable sales, the Quick Method lets you remit less GST/HST than you collect and skip detailed ITC tracking. For restaurants with high ITCs on rent, equipment, and supplies, regular filing usually wins. Calculate both ways for a few months to see what puts more loonies in your pocket.

How do I handle GST/HST for interprovincial catering?

Charge the GST/HST rate of the province where the event actually takes place, not where your business is located. Cater a wedding in Ontario (13% HST) from your Quebec kitchen? You charge 13% HST. The place of supply rules are crystal clear on this one.

Are delivery app fees taxable on my restaurant's invoice?

If you're the supplier (most common), you charge GST/HST on the meal price but not on the separate delivery fee shown on your invoice — the platform handles tax on their service. However, if the platform is your agent, you might need to charge tax on the total amount paid by the customer. Check your agreement and invoicing structure carefully.

What happens if I exceed the $30,000 small supplier threshold mid-year?

You must register for GST/HST immediately (within 29 days) and start collecting tax from that date forward. The $30,000 limit looks at your last four consecutive quarters, not just calendar year. Once you register, you're in for good — there's going back to small supplier status even if sales drop.

Can I claim ITCs on the PST portion in non-HST provinces?

No dice. In provinces with separate PST (BC, SK, MB, QC), you can only claim ITCs for the 5% GST portion. The provincial sales tax is not recoverable for most businesses. This is why harmonized provinces (with HST) can be more tax-efficient — you recover the full 13-15% through ITCs.

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