Collecting GST on Tips?
1410109 Ontario Ltd. v. The King
Interesting court case where a banquet hall based in Ontario was found to be liable for HST on mandatory 15% gratuities.
Typically, gratuities are voluntarily given by the patrons to the servers and staff. Therefore, gratuities do not form part of taxable supplies and related services; and consequently, are not taxable for GST/HST purposes.
Court found that due to the mandatory nature of the gratuity, it formed a part of the taxable supplies and related services. Therefore, the mandatory gratuity was taxable. Here is the full case.
Restaurant, banquet hall, and catering businesses should be aware of this court case; will likely need to collect GST on mandatory gratuities.