Can HST Benefit Restaurants?
The B.C. Government claims that a Harmonized Sales Tax will in fact have a positive impact on the restaurant industry. The HST will purportedly save small and medium size business approximately $2 billion in business costs, savings which, in turn, can be passed to the consumer.
How does this work?
Currently with the embedded PST system businesses are paying taxes on most of their inputs that go into producing their goods or service. These embedded taxes are factored in to the price consumers pay on the final product or service. The HST system would reimburse businesses for all PST on inputs; naturally this should result in a price reduction of the final product.
What ‘inputs’ are exempt for a restaurant?
- fridges, stoves, freezers, dishwashers and other appliances
- energy for heat, cooking and operating equipment and lighting
- cleaning supplies, such as rags, soaps and cleaning solutions,
- cash registers, computer hardware and software
- equipment repair and maintenance services
- paper towel and toilet paper
- customer food bills and menus
- cloth napkins, table cloths, tray covers and placemats
- pots, pans, kitchen implements and knives
- plates, bowls, glasses, cups, other reusable dishes, and cutlery
- coffee machines, blenders, mixers and other small appliances
- free-standing equipment such as juice dispensers, ice machines and coolers
- office equipment, supplies and furniture
- advertising materials, such as flyers and brochures
- items purchased to give away as free promotions
While the Harmonized Sales Tax will encourage new business startup, opponents of the HST system have pointed out that the savings associated with the new tax will not be realized for some time by many businesses that are already operating. For example, a restaurant established before the HST system will have already paid the embedded PST on their equipment and will not immediately benefit from the new streamlined tax. With recent increases to the cost of food and the slowing economy, restaurants operating on small budgets are already struggling to keep prices under control to avoid scaring consumers away.
Conversely, larger businesses and franchises are in a better position to absorb short term losses associated with lowering their prices, and can afford to raise wages and increase investments. Critics say this could effectively cut out smaller, locally established businesses from competing with larger corporations.
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I have worked in the restaurant industry for 6 years. This tax is not good for hospitality. Little mom and pop restaurants are hardly scraping by as it is, they can’t afford to buy new equipment and pay higher wages, let alone lower prices!!
I’d have to say that its going to affect people as well. the prices are set. companies are just going to see this as a way to make more profit on whats already established. why lower the prices when your making more profit on something thats already being bought at a given price point.
I thought the GST was supposed to have replaced the manufacturing tax and all other embedded taxes.
I own a small business and I only pay 5% gst on my raw materials in July I’ll be paying 12%. What savings am I supposed to pass on to my customers??
To Rose-Anne, Erin K
you will save money on your inputs. Sure you will pay more for goods and services but the entire amount of HST can be claimed as a credit on your HST returns. Not sure why you think you are paying more, if fact you will be getting more back.
With the PST you had to build that into your cost of the product with the HST you can claim a credit on the entire amount. It is up to you to figure out the new markup and that is where the savings to customers comes in.
We are experiencing conflicting information regarding food purchases after July 1. We were expecting no HST on food purchases–which would be the way it is for consumers. My restaurant food supplier has the impression that they should start charging HST on food items starting July 1. Which is right?
I think they should shift their focus. Don’t charge HST on restaurants but bring in a junk food tax for all unhealthy food then use that money for health care costs. A sin tax on junk food and unhealthy food. Places that start making food lower in calories and that promotes a more healthy alternative won’t have to charge the tax. How could the industry fight that? If you have good food, you aren’t charged.
fridges, stoves, freezers, dishwashers and other appliances
energy for heat, cooking and operating equipment and lighting
cleaning supplies, such as rags, soaps and cleaning solutions,
cash registers, computer hardware and software
equipment repair and maintenance services
paper towel and toilet paper
customer food bills and menus
cloth napkins, table cloths, tray covers and placemats
pots, pans, kitchen implements and knives
plates, bowls, glasses, cups, other reusable dishes, and cutlery
coffee machines, blenders, mixers and other small appliances
free-standing equipment such as juice dispensers, ice machines and coolers
office equipment, supplies and furniture
advertising materials, such as flyers and brochures
items purchased to give away as free promotions
These exemptions are a crock. The largest on going cost in any restaurant , food outlet or Pub or whatever you operate is the cost of…. FOOD…Which is not on the list…. This is a constant and this is why 50 % of business in BC will file for bankruptcy in the next 12 months. Gauranteed !!!!!
EG. When you purchase food from lets say Sisco or Neptune or whoever, you do not pay HST therefore you can not claim it as a credit. These result, in a loss because it can not be offset when you collect from the Customer.
Any ways, Good luck in the food hospitallity biz, everyone.
Sincerlly, Franky 35 years in the food and bev biz……….
everyone makes good points but…. no-one has mentioned anything about the consumer. we now have a .05 alcohol law as well as increased costs for going out to dinner.i used to go out once a month for a bite and a beer. i have not gone out in 6- months. cannot afford it. now how does that save local restaurants? we are being taxed into bankruptcy!!!!!!!!!!!!!!!!!!!!!!!!
Yea, Frank. I am seriously struggling. I am getting more and more in debt. It appears if something doesn’t go my way, I might have to file for bankruptcy. I thought things were going so well. Not only do I have a 14 month old daughter,I assumed everything would be okay, but it appears the government wants to kick the little guy in the face, and then rub his face in the dirt. I employ five people. They will lose their jobs. I am in a small town and pretty much have nothing really to fall back on. Gst to Hst. almost double. I have a hard time sleeping at night wondering if I am going to make it. I have a hard time increasing prices as I am in a small town and know many of my customers personally. I feel bad for them as well because it’s not my decision. Wage increases so soon after the HST will pretty much be my downfall.
Bottom line is that restaurant clientele now pay 12% tax with the HST on restaurant meals instead of 5% when it was GST only. THAT is why it is a NOT a benefit to restaurants. Less affordable to dine out = less business for restaurants. Hike the minimum wage increase on top of that and we will continue to see restaurants go bankrupt. VOTE TO REPEAL HST!
Im researching the hst trying to educate myself before voting day. The more i learn the more angry i get. Govt has managed to take a solid tax concept that I believe will streamline business function and increase efficiency and competitiveness in a global marktetplace and co-mingle it with an unconscionable (sp?) blanket tax grab that’s going to cost every consumer 7% more on 20% of all their purchases. Thats more than a significant increase to cost of living for anyone, regardless of income bracket! And certain industries such as you folks in the restaurant industry have been hit on more than one front.
No one has even considered that in previous years the list of PST exemptions had been growing for energy efficient and alternate energy products and products related to healthy lifestyles and safety. As of July 1, 2010 all of those exemptions were scrapped. Sorry Mother Nature and Weekend Warriors we need tax revenue!
Here’s my solution for what its worth: IF the main purpose of HST truly is to increase the administrative efficiency and competitiveness of business, locally, and globally for exporters as stated on the hstinbc.ca website (hstinbc.ca states the former PST applied to business inputs “represented a serious drag on productivity, investment, competitiveness and job creation” and mostly affects export) then let’s embrace HST for that purpose only.
Let’s keep the same consumer exemptions/rules that governed PST and apply it to HST. Sure the elimination of some exemptions may be necessary and reasonable, but don’t eliminate EVERY exemption that previously existed. They had been instituted for a reason!
Everyone wins the way i see it. Business gets what they want, government gets what they SAY they want (an injection into the economy from increased efficiency and competitiveness of business)
And the consumer isn’t left juggling fewer pennies as a result of all the former pst exemptions being eliminated (gov’t must have seen legitimate reasons for making the pst exemptions available in the past or they would never have existed, right?)
Adn that’s all i have to say about that.
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