A recent court ruling found that restaurant owners, and subsequently employees, must now include credit card tips as a liability for CPP and EI payments. The ruling was made in response to the Ristorante a Mano v Minister of National Revenue case.
Ristorante a Mano is a Halifax-based restaurant which employs servers who are tasked with tableside customer service.
When customers pay in cash, servers were allowed to pocket an undisclosed portion of the sum, later opting whether or not to disclose the income. However, all tips via credit or debit card were electronically transferred to the servers the following day.
When completing yearly liability reports, the restaurants chose not to include electronic tips as a form of pensionable salary or wages. CRA believed these payments fell under taxable income, forcing them to reassess the restaurant’s tax forms from 2015-2017.
After lengthy court proceedings, the court made a decision in favour of the Minister of National Revenue. Therefore, all tips contributed during the payment of a meal via credit card will fall under the category of pensionable and insurable income.
As a result, restaurant owners and employees will now be on the hook for a more significant sum of income come tax season. The court also warned that restaurant owners not being taxed this year could potentially be audited and re-assessed for previous years.
Toronto in particular is a city that has seen an outcry on tipping habits from both staff members and customers. This August, attendees at Summerlicious were distraught at the 18%-20% tip which was recommended on the companies website.
Around the same time, a Redditor tweeted about “the most offensive tipping options I’ve ever come across” in which they described their tipping options were as follows:
- 18% (Needs improvement)
- 20% (Kay)
- 25% (Good enough)
- 30% (Great job)
With the court passing this law, one can only speculate about the continuing tipping escapade which has entrenched the city.