GST/HST for tiffin and meal-prep businesses in Canada
Rice and lentils are not taxed. A cooked meal delivered to a door usually is. Here is the difference, and what it means for every tiffin you sell.
· 4 min read
Many tiffin owners have heard that food is not taxed in Canada. It is easy to believe. You don't pay GST on rice or lentils at the store. But a cooked meal is different. The rule that makes a bag of rice tax-free usually does not cover the meal you cook from it. Finding this out late can be expensive.
When you have to register
While your sales stay at or under $30,000 over four quarters in a row (one year), you are a small supplier. A small supplier does not have to register or charge GST/HST. Count all your sales that could be taxed, not just tiffins.
When you go over $30,000, the rules depend on how fast it happened:
- Over $30,000 in one quarter (three months): you must charge GST/HST on the sale that took you over. You have 29 days to register.
- Over $30,000 across four quarters, but not in one quarter: you stop being a small supplier at the end of the month after that quarter. From then on you must charge GST/HST, and you have 29 days to register.
For example, at $15 a meal, $30,000 is about 2,000 meals. In one year, that is only about 6 or 7 meals a day, six days a week. The CRA explains the rules in when to register for and start charging the GST/HST.
Why your meals are probably taxed
Basic groceries are zero-rated. That means they are taxed at 0%. Most food and drinks, including ingredients you cook with, are in this group. This is the rule people remember.
Prepared food is different. The CRA's Basic Groceries memorandum lists foods that are still taxed. Food made to be eaten right away is one of them. For example, sandwiches are taxed unless they are frozen (kept at 0°C or colder). Food that is only kept in the fridge still counts as ready to eat, so it is taxed.
A hot, cooked meal delivered to someone's door for dinner is clearly made to be eaten right away. Assume your tiffins are taxed unless an accountant tells you otherwise.
When it is not clear, the CRA looks at how you show, label, pack, bill and advertise the food. So the way you describe your food matters. Keep this in mind when you write your menu.
Which tax rate to charge
The rate depends on the place of supply. For delivered food, that means where the food goes, not where you cook it. For example, a kitchen in Ontario delivering in Ontario charges 13% HST. A kitchen in BC charges 5% GST, plus PST where PST applies. If you deliver into another province, use that province's rate.
This makes things harder for kitchens near a provincial border. It is one more reason to keep your delivery areas small.
The good part: you can get tax back on what you buy
Once you are registered, you can claim back the GST/HST you paid on things you buy for the business. These are called input tax credits. They include containers, packaging, equipment, kitchen rent, gas and software. If you spend thousands of dollars a year on packaging, this adds up.
You can also register before you reach $30,000, just to claim this tax back. Whether it is worth the extra paperwork depends on how much you spend. Ask your accountant.
What to write down from day one
The less you write down during the year, the harder tax time is. At the very least, keep track of:
- Your sales, all the time. Then you see the $30,000 line coming. You don't find out months later that you crossed it.
- Tax collected, kept apart from your sales. The tax you collect is not your money. You are holding it for the CRA. If it sits in the same account, it is easy to spend.
- GST/HST you paid on things you bought, with receipts, so you can claim it back.
- Which province each delivery went to, if you deliver into another province.
- How each customer paid. Cash, e-transfer and card should match what you report.
In Tiffinware, the payments report shows money in by card, e-transfer and cash, with GST collected and refunds, for any dates you pick. The profit and loss report lists your costs by type, which helps with claiming tax back. They don't replace an accountant. They just give your accountant a clear report instead of a box of receipts.
In short
- Under $30,000 over four quarters in a row, you are a small supplier and don't have to charge GST/HST.
- Over it, you must register within 29 days and start charging tax. The CRA page above explains exactly when.
- Your meals are very likely taxed, even though groceries are not.
- The rate depends on where the food is delivered.
- Keep tax collected apart from your sales, and keep receipts for what you buy.
None of this is hard. It only costs you when you find out late.