The QST, GST/HST, and Food

About this content

This content is a simplified rewording of Revenu Quebec's official publication: IN-216(2019-01).pdf, produced to help citizens and entrepreneurs better understand their tax obligations. It does not constitute legal or tax advice. Refer to the official document for any decision.

Who this document is intended for

This document is primarily intended for individuals and businesses that operate in the food sector. It is intended in particular for:

• grocers;
• convenience store owners;
• bakers;
• pastry makers;
• butchers;
• restaurateurs;
• owners of snack bars;
• bar owners;
• caterers;
• vending machine operators;
• other merchants or suppliers who sell food or beverages. It also concerns businesses registered or likely to have to register for the GST/HST and QST files, as well as small businesses that must determine whether or not they must collect these taxes.

Context and purpose

This publication explains how the goods and services tax, the harmonized sales tax, and the Quebec sales tax apply to food, beverages, and certain sales made in the food sector.

It was designed to help food and beverage suppliers distinguish between:

• basic food products that are generally zero-rated;
• taxable food products;
• exempt sales in certain specific contexts;
• special cases related to discount coupons, refundable containers, gift cards, franchise fees, tips, and service charges. The document is part of the application of the Excise Tax Act, the Quebec Sales Tax Act, and the rules administered by Revenu Quebec, in collaboration with the Canada Revenue Agency. The publication also states, however, that it is provided for information purposes only and does not constitute a legal interpretation of the applicable tax laws. It also mentions that the English version is available under the title The QST and the GST/HST: How They Apply to Foods and Beverages (IN-216-V).

Full and detailed information

Acronyms used in the document

Acronym	Meaning
CRA	Canada Revenue Agency
ITC	Input tax credit
ITR	Input tax refund
GST	Goods and services tax
HST	Harmonized sales tax
QST	Quebec sales tax

General rules for applying GST/HST and QST

GST and QST apply to the supply of most goods and services.

Applicable rates

• GST generally applies at a rate of 5% to the selling price of most transactions carried out in Canada.
• In Quebec, QST is generally added at a rate of 9.975% to the selling price.
• Some goods and services are taxable at a rate of 0%: they are then said to be zero-rated.
• Some other goods and services are exempt, which means that GST and QST do not apply.

Examples of zero-rated goods or services

The document gives the following examples of zero-rated goods and services:

• basic food products;
• prescription drugs.

Examples of exempt goods or services

The document mentions in particular:

• certain health care services;
• long-term residential rents.

Application of HST

HST applies in the following participating provinces:

• Prince Edward Island;
• New Brunswick;
• Nova Scotia;
• Ontario;
• Newfoundland and Labrador. As a general rule, the rules that apply to GST also apply to HST. Registered businesses must collect and remit HST on taxable sales, except zero-rated sales, that they make in the participating provinces. In this publication, the term GST is used in the sense of GST/HST, unless a statement indicates otherwise. By exception, in certain passages and examples, the document specifies that the acronym GST refers only to GST and not to GST/HST.

Registration for GST and QST files

Persons who carry on commercial activities, that is, who operate a business making taxable sales, must generally register for GST and QST files. A registered person must collect GST and QST on taxable sales, except when they are zero-rated sales. However, a person who carries on commercial activities and who has chosen not to register because they are a small supplier does not have to collect GST or QST, except in the case of the sale of taxable real property.

Small supplier

As a general rule, a person is considered a small supplier when the total of their taxable sales does not exceed $30,000:

• for a given calendar quarter;
• nor for the total of the preceding four calendar quarters. The calculation includes taxable sales made worldwide by:
• the person;
• the person's partners. The calculation excludes sales of capital property, for example:
• a building;
• a motor vehicle. Even when a person is not required to register, they may choose to do so voluntarily if they meet certain conditions. Under the QST system, certain persons who qualify as small suppliers must still register. The document gives as an example persons who retail:
• alcoholic beverages;
• tobacco.

ITCs and ITRs

A registered person may recover the GST and QST paid or payable on the goods and services acquired in the course of their commercial activities. These recoveries take the form of:

• an ITC under the GST system;
• an ITR under the QST system. Until December 31, 2020, large businesses are subject to certain restrictions regarding the obtaining of an ITR. Large businesses are considered to be those whose taxable sales in their last fiscal year exceed $10 million.

Time limit to claim ITCs and ITRs

Most registrants claim their ITCs and ITRs in their GST and QST returns for the period in which the purchases were made. In general, the maximum time limit to claim the ITCs and ITRs to which a person is entitled is four years.

Simplified method for calculating ITCs and ITRs

A simplified method exists for small businesses. This method:

• provides another way to calculate ITCs and ITRs when filing GST and QST returns;
• does not change the way taxes are invoiced;
• does not change the collection of GST or QST;
• does not change the reporting of taxes collected;
• avoids having to calculate the exact amount of tax for each invoice or supporting document.

GST and QST returns

A GST and QST return is used to report:

• taxes collected;
• taxes that should have been collected;
• taxes paid for which ITCs or ITRs are claimed. When filing:
• ITCs are subtracted from GST collected or collectible;
• ITRs are subtracted from QST collected or collectible. If taxes collected or collectible exceed ITCs and ITRs, the business must remit the difference. If taxes collected or collectible are less than ITCs and ITRs, the business may request a refund. Small businesses may also use a quick accounting method to determine the amounts of GST and QST to remit.

Filing frequency

When registering for GST and QST files, it may be possible to choose the filing frequency for tax returns. If no choice is made, a frequency is assigned by the tax administration.

Obligation to file electronically

A registrant, except a charity, must file GST and QST returns electronically if the annual total of taxable sales made in Canada exceeds $1,500,000. This annual total excludes:

• sales made abroad;
• zero-rated exports of goods and services;
• taxable sales of real property;
• taxable sales of goodwill.

Basic food products

Most basic food products are zero-rated. Basic food products are considered to be most foods and beverages intended for human consumption, as well as:

• sweeteners;
• seasonings;
• ingredients mixed with food or beverages;
• ingredients used in the preparation of food or beverages. The document gives the following examples of basic food products:
• fresh, frozen, canned, or vacuum-packed fruits and vegetables;
• breakfast cereals;
• most dairy products, including:
• unflavored milk;
• cheese;
• butter;
• cream;
• sour cream;
• yogurt;
• fresh meat, including:
• beef;
• poultry;
• pork;
• lamb;
• prepared meats;
• sausage;
• eggs;
• fresh fish;
• coffee beans. Certain categories of food and beverages remain taxable, however, including carbonated beverages, confectionery, and snack foods.

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Heated food and beverages

The sale of food or beverages heated for human consumption is taxable. This includes food and beverages that are:

• heated;
• kept warm;
• intended to be consumed hot. These products may be sold, in particular, in grocery stores or restaurants. Examples of taxable products:
• fries;
• chicken;
• pizzas;
• food offered at a heated counter;
• food sold at a separate takeout counter;
• food purchased and then heated at the point of sale;
• coffee;
• tea;
• hot chocolate;
• other hot beverages. Prepared food sold unheated, other than at counters where such products are usually sold, is zero-rated.

Reworded example

A butcher sells rotisserie chickens that are still hot: this sale is taxable. If the unsold chickens are then placed in a refrigerated counter, their sale becomes zero-rated.

Alcoholic beverages

The sale of alcoholic beverages is taxable, whether or not they are dealcoholized. Taxable items include:

• wines;
• spirits;
• beers;
• malt beverages;
• other alcoholic beverages.

Exception: cooking wines

The sale of cooking wines is zero-rated when these products:

• are sold and presented as condiments;
• are usually purchased in grocery stores.

Concentrates and beer kits - GST

Under the GST system:

• grape juice concentrates used by consumers to make wine are zero-rated;
• beer kits made up only of the ingredients required to make beer, such as yeast or hops, are zero-rated;
• beer kits that contain more than the necessary ingredients, for example equipment essential to making the beer, are taxable.

Products intended to make wine or beer - QST

Under the QST system, the sale of the following products intended for the making of wine or beer is taxable:

• grapes;
• juice;
• must, whether or not concentrated;
• malt;
• malt extracts;
• similar products. Beer kits that contain more than the required ingredients, for example equipment essential to making the beer, are also taxable.

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Carbonated beverages

All carbonated beverages are taxable, whether or not they are sold in individual portions. Taxable items include:

• mineral waters, carbonated, flavored or not;
• kombucha;
• mixers, such as:
• tonic water;
• plain soda water.

Premix and postmix

Some establishments use carbonated beverage dispensing machines operated with cylinders containing products called premix or postmix.

Product	Description	Tax status
Premix	Carbonated beverage containing syrups and carbon dioxide, that is, CO2	Taxable
Postmix	Mixture containing all the ingredients of a carbonated beverage except CO2	Zero-rated
CO2 cylinders	Carbon dioxide sold separately	Taxable

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Beverages other than alcoholic or carbonated beverages

Fruit juice-based beverages or fruit-flavored beverages are taxable if they contain less than 25%, by volume, of natural fruit juice or a combination of such juices, reconstituted or not.

This rule applies regardless of whether these beverages are sold:

• in individual portions;
• otherwise than in individual portions. Products that produce a fruit-flavored beverage containing less than 25% natural fruit juice when added to water are also taxable. Examples:
• crystals;
• powders.

Milk-based beverages and iced tea mixes

Milk-based beverages and iced tea mixes, including fruit-flavored ones, are zero-rated if they are not sold in individual portions.

Beverages served at the point of sale

The sale of beverages served at the point of sale is taxable. This rule covers, in particular:

• milk;
• coffee;
• tea;
• iced tea;
• hot chocolate;
• juice;
• other beverages.

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Beverages sold in individual portions

The sale of beverages in individual portions is generally taxable, except for unflavored milk. An individual portion of a beverage corresponds to a unit of less than 600 mL.

Zero-rated exceptions

The sale of beverages in individual portions is zero-rated if one of the following conditions applies:

• the beverages are sold in prepackaged multipacks by the manufacturer or producer and contain several individual portions;
• the beverages are sold in a box, bottle, or other original container whose contents exceed an individual portion;
• the beverages are prepared and packaged specially for babies.

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Confectionery

Candy, confectionery similar to candy, and all products sold as candy are taxable, whether they are naturally or artificially sweetened. Also taxable when they are coated or treated with candied sugar, chocolate, honey, molasses, sugar, syrup, or artificial sweeteners:

• fruit;
• seeds;
• nuts;
• popcorn.

Examples of taxable confectionery

• chocolate-coated coffee beans;
• chocolate-coated raisins;
• chocolate bars;
• chocolates containing:
• fruit;
• butter caramel;
• caramel;
• fondant;
• liqueurs;
• fruit pastilles;
• gummy candies;
• marshmallow treats;
• cream treats;
• sesame bars;
• chewing gum;
• cotton candy.

Zero-rated products related to chocolate or decorations

The following are zero-rated:

• bulk industrial chocolate;
• cooking chocolate;
• liquid chocolate for glazing;
• edible cake decorations, when they are packaged and sold as cake decorations;
• chocolate icing;
• canned fondue chocolate;
• fondue chocolate in bar form, except when these bars are repackaged as fondue chocolate for a sale in the context of door-to-door solicitation;
• cocktail cherries;
• angelica used in particular to decorate cakes.

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Individual servings of pudding

The sale of puddings is taxable, except in certain situations. An individual serving of pudding or similar product corresponds to a unit of less than 425 g.

Zero-rated exceptions

The sale is zero-rated when:

• the puddings are sold in prepackaged multipacks by the manufacturer or producer containing several individual portions;
• they are sold in a box, bottle, or other original container whose contents exceed an individual portion;
• they are prepared and prepackaged specially for babies.

Taxable products in individual portions, except where an exception applies

• pudding;
• flavored gelatin;
• mousse;
• flavored whipped dessert.

Ice cream and similar products

The sale of the following products is taxable when they are packaged or sold in individual portions:

• ice cream;
• ice milk;
• sorbet;
• frozen yogurt;
• frozen pudding;
• replacement products for these products;
• any product containing one of these products. Replacement products include, for example, frozen products made from tofu. Taxation applies even if the package contains several individual portions. An individual portion corresponds to a package or unit of less than:
• 500 mL;
• or 500 g. A product is considered to be packaged in individual portions when each portion is packaged separately.

Water

The sale of bottled water is zero-rated, unless it is sold in a quantity corresponding to an individual portion. An individual portion of water corresponds to a unit of less than 600 mL.

Non-carbonated fruit-flavored water

Non-carbonated fruit-flavored water is taxable, regardless of:

• the container format;
• the package size.

Carbonated water

Carbonated water is taxable, whether flavored or not.

Non-bottled water dispensed by a vending machine or at the supplier's establishment

The sale of non-bottled water intended for human consumption is zero-rated if all the following conditions are met:

• it is dispensed by means of a vending machine operated by the supplier or at the supplier's permanent establishment;
• it is sold to a consumer;
• the quantity sold exceeds an individual portion.

Ice

Ice made with water fit for human consumption is zero-rated, regardless of the quantity sold.

Snack foods

The sale of the following products is taxable:

• chips, curls, sticks, and other similar snack foods;
• salted nuts and seeds;
• granola products, except those sold mainly as breakfast cereals;
• snack mixes containing cereals, nuts, seeds, dried fruit or other edible products, except products sold mainly as breakfast cereals;
• bars, rolls, fruit pastilles, and other fruit-based similar snack foods.

Taxable examples

• potato chips;
• corn chips;
• cheese sticks;
• shoestring potatoes;
• bacon-flavored chips;
• cheese curls;
• popcorn, except unpopped kernels;
• unpopped corn kernels sold for microwave cooking: not covered by the taxation of already-popped popcorn, whether salted or not;
• crunchy pretzels;
• salted peanuts;
• salted sunflower seeds;
• trail mix;
• granola bars;
• dehydrated fruit paste.

Trays of prepared foods

Trays and arrangements of prepared foods are taxable. Taxable items include:

• cheese platters;
• fruit platters;
• vegetable platters;
• cold cuts platters;
• other prepared food arrangements. Examples:
• appetizer platters including cheeses, fruits, canapes or pates;
• vegetable crudites platters;
• platters of meat, fish, poultry or other foods, including cold meats;
• frozen shrimp rings;
• sushi platters.

Sweet baked goods and similar products

The sale of certain sweet baked goods is taxable when they are sold in small quantities. Products covered:

• cakes;
• muffins;
• pies;
• pastries;
• tartlets;
• cookies;
• doughnuts;
• brownies;
• croissants with sweet filling;
• similar products. The sale is taxable in either of the following cases:
• the products are prepackaged for sale to consumers in quantities of fewer than six items, each being an individual portion;
• the products are not prepackaged for sale to consumers, but are sold in quantities of fewer than six individual portions. An individual portion corresponds:
• to an individual item weighing less than 230 g;
• or to a portion or part of a product presented in individual portions.

Sweet filling

A sweet filling includes:

• sweetening ingredients added as an interior filling;
• icings;
• sweet toppings applied to the surface;
• sugars applied before, during or after processing of the product. The following are not considered sweet fillings:
• unsweetened fruit;
• sweeteners used only as catalysts for leavening agents. These products are generally purchased or served as desserts or snacks and may be:
• baked;
• fried;
• fresh;
• frozen;
• otherwise prepared for sale.

Taxable products when sold in fewer than six individual portions

• cakes, including tea buns and tea cakes;
• pies;
• tartlets;
• flans;
• sweet pancakes;
• muffins, including bar muffins;
• cookies;
• strudels;
• thin wafers;
• English puddings;
• doughnuts;
• beignets;
• waffles;
• breads made mainly from muffin mix or a similar sweet preparation, such as banana bread or carrot bread;
• graham crackers.

Assortment of six or more individual portions

The sale of an assortment of at least six individual portions of products normally taxable in this category is zero-rated if those portions are not individually wrapped. Example: an assortment made up of one tartlet, two muffins, one cookie, and two doughnuts is zero-rated.

Products zero-rated because they are not considered sweet baked goods

The following are zero-rated:

• traditional breads;
• tortillas;
• taco shells;
• meat pies;
• chicken pies;
• other similar pies;
• dough of any kind, including:
• puff pastry;
• cookie dough;
• pie crusts;
• vol-au-vents;
• phyllo dough;
• English muffins without sweet filling;
• fresh pretzels;
• traditional baked products without sweet filling, including:
• bagels;
• scones;
• tea biscuits;
• croissants;
• buns;
• crackers, except graham crackers;
• unsweetened rice cakes.

Salads

The sale of salads is taxable, except when they are:

• canned;
• vacuum-packed. A salad is a preparation that may contain, in particular:
• chopped vegetables;
• vegetables passed through a food mill;
• diced vegetables;
• sliced vegetables;
• pureed vegetables;
• meat;
• fish;
• eggs;
• other foods prepared with a sauce or seasoning. A preparation is considered a salad even if the sauce has not yet been mixed with the other ingredients. A combination of an ingredient with a sauce or seasoning is also considered a salad if it is sold or presented as such. Prepared cut-vegetable mixes without sauce are zero-rated if the product is not presented as a salad. Jellied salads, which often contain fruit and may be molded, are considered salads. Fruit salads and jellied salads are considered salads even if they generally do not contain sauce.

Packages of ingredients to be assembled

A package containing separate ingredients used to make a salad, for example:

• lettuce;
• dressing;
• seasonings; and that the consumer must mix themselves, is not considered a salad. This type of package is zero-rated.

Sandwiches and similar products

Sandwiches and similar products are taxable, regardless of the place of sale. The rule applies in particular when they are sold in:

• restaurants;
• grocery stores;
• prepared food counters in convenience stores;
• pastry shops.

Exception

Sandwiches and similar products are zero-rated if they are frozen, that is, kept at a temperature of 0 C or less.

Examples of sandwiches and similar products

• hot dogs;
• hamburgers;
• grilled sandwiches;
• submarine sandwiches;
• stuffed or rolled pitas;
• stuffed or rolled tortillas;
• other similar products sold with a mixture of prepared foods.

Frozen treats and similar products

The sale of the following products is taxable:

• frozen treats;
• fruit-juice ice bars;
• frozen confections;
• similar products flavored, colored, or sweetened. These products are taxable whether they are frozen or not. Taxation applies even if the product contains:
• fruit juice;
• pieces of fruit. The percentage of fruit juice has no effect on the taxable status. The form of presentation also has no effect: the product is taxable whether it is on a stick or presented otherwise. Frozen confections made from a mixture of fruit or fruit juice and dairy products, such as cream or ice cream, are also taxable.

Maple products

Food products made from maple sap or maple products may be taxable or zero-rated depending on their nature.

Taxable maple products

• maple taffy on snow;
• maple butter cones;
• maple sugar candy;
• maple candies;
• maple-filled chocolates.

Zero-rated maple products

• maple syrup;
• maple butter;
• maple taffy, except when sold as candy;
• soft maple sugar;
• granulated maple sugar;
• maple jelly.

Food and beverages sold under a contract with a caterer

All food and all beverages sold under a contract with a caterer are taxable. This rule applies whether or not the contract includes service.

Products consumed by certain cultural groups

Food and beverages consumed by specific cultural groups are considered basic food products when they are consumed as such. This rule applies even if these products are not generally recognized in Canada as common foods or beverages. They are therefore usually zero-rated. However, they become taxable if they belong to a taxable category of foods or beverages mentioned in the rules on food products.

Meal replacements and nutritional supplements

Products that are:

• meal replacements;
• nutritional supplements;
• liquid diet preparations; are considered basic food products if they meet the requirements of the Food and Drugs Act and its regulations. Their sale is therefore zero-rated.

Dietary supplements

Dietary supplements are generally consumed for:

• therapeutic effects;
• preventive effects;
• special performance effects;
• special effects on appearance or physical condition. They may be made of natural or synthetic ingredients. They include in particular:
• vitamins;
• minerals;
• tonics;
• fiber;
• proteins;
• amino acids;
• herbal supplements. They are often offered in the form of:
• pills;
• tablets;
• capsules;
• powder;
• gels;
• wafers;
• liquids;
• concentrates. These products are generally taxable. To determine whether a product is a dietary supplement rather than a food, beverage, or ingredient, consideration must be given to:
• its labeling;
• its packaging;
• its marketing. Products sold as foods or beverages and marketed for their beneficial health effects are generally zero-rated if they do not fall within the taxable categories already listed, for example:
• carbonated beverages;
• fruit-flavored beverages;
• granola products.

Vitamins and additives

Vitamins, minerals, and additives sold in the form of pills, capsules, tablets, or other forms are generally taxable.

Exception for food manufacturers

When these products are purchased by a food manufacturer to produce foods or beverages intended for human consumption, they are considered ingredients used in the preparation of those foods or beverages. In that case, they are zero-rated.

Reworded example

A cereal manufacturer buys bulk vitamins to add them to breakfast cereals. This vitamin purchase is zero-rated.

Multipurpose products

Ingredients intended to be mixed with foods or beverages, or used in their preparation for human consumption, are zero-rated. Some of these products may also be used for non-food purposes. In that case, the packaging and presentation are decisive.

Product sold in the same form for food and non-food use

If a product is sold for non-food use in the same packaging or in the same form as when it is sold as a food, beverage, or food ingredient, the sale is zero-rated.

Product intended only for non-food use

If the product is packaged and intended exclusively for non-food uses, the sale is taxable.

Products always taxable regardless of use

Certain ingredients remain taxable even if they are used in a food context, including:

• carbon dioxide, that is CO2;
• alcoholic beverages.

Reworded example

Baking soda sold in a 500 g box as a pastry ingredient is zero-rated. If it is sold in the same packaging to keep food fresh in a refrigerator, it remains zero-rated.

Edible products that are not basic food products

Certain edible products are not considered basic food products. Taxable items:

• potted herbs containing soil;
• potted vegetable plants containing soil. Zero-rated items:
• dried herbs;
• packaged spices; if they are sold or presented as seasonings for food.

Mixed sales of food products

When a zero-rated product and a taxable product are combined and sold for a single price, the tax status depends on the nature and characteristics of the goods sold together.

Reworded example

A sale combining whole black pepper and a pepper grinder is taxable if most of the value of the product comes from the grinder, since the grinder is taxable.

Gift baskets

The tax treatment of a gift basket depends on the proportion of its value attributable to zero-rated or taxable components. The total value of the gift basket includes:

• the products;
• the basket itself;
• the packaging. | Situation | Tax status | |---|---| | At least 90% of the value of the components is attributable to zero-rated products | Zero-rated gift basket | | More than 10% of the total value relates to taxable components | Taxable gift basket |

Suppliers of food and beverages

The document distinguishes several types of food and beverage suppliers:

• grocery stores and supermarkets;
• food service establishments;
• vending machine operators;
• educational or health care establishments;
• public sector bodies.

Grocery stores and supermarkets

Most products sold in grocery stores and supermarkets are zero-rated basic food products. However, certain foods and beverages remain taxable according to the rules detailed in the section on food products. Grocery stores and supermarkets also sell products that are neither foods nor beverages. These products are generally taxable.

Food service establishments

Businesses whose 90% or more of food and beverage sales are taxable must collect the taxes on all their food and beverage supplies, except where an exception applies. Some businesses sell foods or beverages even though that is not their main source of income. The document gives as examples:

• a department store with a snack bar;
• a hotel offering dining room service and room service;
• an arena operating a food counter;
• a cinema operating a food counter. In these contexts, most foods and beverages sold are taxable, except where an exception applies.

Reworded example

In a restaurant, small buns served separately a la carte are taxable.

Exceptions in food service establishments

Foods and beverages remain zero-rated when they are sold in a form that does not allow immediate consumption, considering:

• their nature;
• the quantity sold;
• the packaging. Examples:
• a bag of coffee beans is zero-rated because it cannot be consumed immediately as is;
• an uncooked pizza is zero-rated;
• a two-liter container of ice cream is zero-rated because of its quantity and packaging.

Sweet baked goods in food service establishments

Food service businesses must collect taxes on sweet baked goods and similar products, unless the products are not sold for on-site consumption and meet one of the following conditions:

• they are prepackaged for sale to consumers in quantities of more than five items, each being an individual portion;
• they are not prepackaged and are sold in quantities of more than five individual portions. An individual portion corresponds:
• to an individual item weighing less than 230 g;
• or to a portion or part of a product offered in individual portions.

Reworded example

When a restaurant sells a whole cake to go, the sale is zero-rated.

Businesses covered

The businesses covered include in particular:

• restaurants;
• fast-food restaurants;
• restaurants with delivery;
• snack bars;
• bars;
• lounge bars;
• mobile canteens.

Vending machine operators

All food and beverages sold by means of a vending machine are taxable. This rule applies even to products that would normally be zero-rated, such as:

• milk;
• fruit. GST and QST are included in the displayed prices of food and beverages sold by vending machine.

Exception related to machines accepting only one coin

GST and QST are nil when the vending machine accepts only one coin of 25 C or less per transaction.

Educational or health care establishments and public sector bodies

The term public sector body includes:

• a government;
• a non-profit organization;
• a charity;
• a municipality;
• a school authority;
• a hospital authority;
• a public college;
• a university.

Exempt sales

The following products and services, when sold by educational or health care establishments or by public sector bodies, are exempt from GST and QST:

• most foods and beverages sold primarily to students in primary and secondary schools and served:
• in the cafeteria;
• during extracurricular activities organized by the school authority;
• meals sold to students enrolled in a university or public college under a formula giving them, for a single consideration, the right to take at least 10 meals per week in a restaurant or cafeteria of the university or public college, over a period of at least one month;
• food and beverages and catering services sold to a school authority under a contract to provide food and beverages primarily to students in the cafeteria of a primary or secondary school;
• food and beverages and catering services sold to a university or public college under a contract to provide meals to students under a formula giving the right to at least 10 meals per week for at least one month;
• food and beverages sold by a public sector body in the context of an activity intended to relieve poverty, suffering, or distress;
• food and beverages sold by a public sector body to elderly, disabled, or disadvantaged persons in the context of a home-delivered prepared food program;
• food and beverages sold to the public sector body in the context of the same home-delivered program;
• food and beverages served to patients and residents of health care establishments.

Exception concerning students

Food purchased by students in a convenience store or similar establishment is not exempt, even in a university or college context.

Taxable sales

The following products and services are taxable when sold by educational or health care establishments or by public sector bodies:

• food and beverages sold by vending machines, unless the machine accepts only one coin of 25 C or less per transaction, in which case GST and QST are nil;
• carbonated beverages;
• fruit-flavored beverages containing less than 25% natural fruit juice and sold in cans, boxes, or bottles;
• confectionery;
• chips;
• other similar snack foods sold to students in primary and secondary schools and served in the cafeteria or during extracurricular activities organized by the school authority;
• food and beverages served during receptions, meetings, or similar private events held in an educational establishment;
• food and beverages sold in hospital cafeterias.

Special cases and exceptions

Discount coupons

A discount coupon may be a receipt, ticket, or other document giving the holder the right to a reduction in the price of a specific good or service. The value may be:

• monetary and specified, for example $2 off;
• expressed otherwise, for example 10% off. Coupon redemptions are not taxable.

However, the services provided by a coupon redemption center are subject to GST and QST.

Refundable discount coupons

Refundable discount coupons reduce the total bill as if they were a cash payment. They are generally called manufacturer coupons. GST and QST are deemed to be included in the face value of the coupon. These coupons have in particular the following characteristics:

• the retailer submits them to a third party, for example a redemption center or a manufacturer, in order to obtain a reimbursement;
• they give the purchaser a specific discount, that is, a fixed amount, at the time of purchase;
• they apply only to taxable goods or services, excluding zero-rated goods or services.

Calculation when prices do not include taxes

If the displayed price does not include GST or QST, the retailer must:

1. determine the total value of the items;
2. calculate and add GST and QST;
3. then deduct the value of the coupon from the total billed.

Calculation when prices include taxes

If the displayed prices already include GST and QST, the retailer must:

1. determine the total sale;
2. deduct the value of the coupon.

Example with a $10 coupon

A customer buys a good and presents a $10 coupon.

Item	Taxes not included in the price	Taxes included in the price
Good	$25.00	$28.74
GST on $25 at 5%	+ $1.25	---
QST on $25 at 9.975%	+ $2.49	---
Subtotal	$28.74	$28.74
Value of coupon, taxes included	$10.00	$10.00
Amount payable	$18.74	$18.74
In this example, the document states that the acronym GST refers only to GST and not to GST/HST.

Reporting by the retailer

To prepare its returns, the retailer must calculate the GST and QST collected without reducing these taxes based on the value of the coupon. When it submits the coupon to the manufacturer, the latter generally reimburses the total value of the coupon, taxes included.

Manufacturer's ITCs and ITRs

The manufacturer may claim an ITC and an ITR for the GST and QST reimbursed and deemed to be included in the coupon. The applicable fractions are:

Tax or province	Fraction applicable to the value of the coupon
GST	5/105
QST	9.975/109.975
Prince Edward Island	15/115
New Brunswick	15/115
Nova Scotia	15/115
Newfoundland and Labrador	15/115
Ontario	13/113

Effect for a registrant who uses a coupon for business purchases

A registrant who uses a coupon to buy goods or services for their business must take into account the fact that the coupon reduces the taxes actually paid, since the value of the coupon is deducted after the taxes are calculated. They must therefore reduce their ITC or ITR as follows:

Tax or province	Reduction to apply
GST	5/105 of the coupon value
QST	9.975/109.975 of the coupon value
New Brunswick	15/115 of the coupon value
Nova Scotia	15/115 of the coupon value
Newfoundland and Labrador	15/115 of the coupon value
Ontario	13/113 of the coupon value

Non-refundable discount coupons

Non-refundable discount coupons are generally distributed by a retailer. They have in particular the following characteristics:

• they are not submitted to a third party for reimbursement;
• they give the purchaser a specific discount, in the form of a fixed amount or fixed percentage, at the time of purchase;
• they apply only to taxable goods or services, except zero-rated goods or services. The retailer may treat these coupons as refundable coupons in order to standardize its accounting. In that case, the rules applicable to refundable coupons apply. The retailer may claim an ITC and an ITR for the GST and QST deemed to be included in the value of the coupons for the reporting period in which it accepted them.

Other possible treatment

The retailer may also deduct the value of the coupon from the price of the good or service before calculating the taxes. In that case:

• GST and QST are calculated on the reduced price;
• the retailer cannot claim an ITC or ITR in respect of the value of the coupons received.

Example with a $3 coupon

A customer buys a container of detergent and presents a coupon that reduces the price.

Item	Amount
Laundry detergent	$25.00
Value of coupon	$3.00
Subtotal	$22.00
GST on $22 at 5%	+ $1.10
QST on $22 at 9.975%	+ $2.19
Amount payable	$25.29
In this example, the document states that the acronym GST refers only to GST and not to GST/HST.

Other discount coupons

Coupons that do not give the right to a specific discount are considered non-refundable discount coupons whose value is deducted from the price before the taxes are calculated. These coupons may, in particular:

• provide various discount percentages depending on the quantity purchased, for example:
• 10% when buying 5 boxes or less;
• 20% when buying 6 boxes or more;
• allow one item to be obtained free with the purchase of another item, for example offers of the "two for the price of one" type;
• give entitlement to different discounts depending on the format, for example:
• $0.50 off a 1-liter bottle of carbonated beverage;
• $1 off a 2-liter bottle;
• be applicable to taxable or exempt goods and services.

Returnable containers

Special rules apply to returnable beverage containers. As a general rule, GST and QST do not apply to the refundable deposit.

Gift cards or gift certificates

A gift card is a magnetic or chip card issued by one or more merchants. It contains a recorded amount and allows goods or services to be purchased from those merchants. A gift certificate, also called a gift voucher, is a document allowing payment for goods or services purchased from one or more merchants. The sale of a gift card or gift certificate is not taxable. However, when the customer uses the card or certificate, GST and QST must be calculated on the price of the good or service sold, as if payment were made in cash. The value of the gift card or gift certificate then constitutes part or all of the payment.

Example with a $15 gift card

A student receives a $15 gift card usable in a convenience store. The student buys taxable goods of $16.

Item	Amount
Taxable goods	$16.00
GST on $16 at 5%	+ $0.80
QST on $16 at 9.975%	+ $1.60
Subtotal	$18.40
Value of gift card	$15.00
Amount payable	$3.40
In this example, the document states that the acronym GST refers only to GST and not to GST/HST.

Concession or franchise fees

Concession or franchise fees are usually taxable. They may include in particular:

• management services;
• accounting services;
• administrative services;
• promotional items;
• stationery items.

Tips and service charges

Tips given voluntarily to employees are not subject to GST or QST. By contrast, mandatory tips added to the bill as service charges are taxable.

Steps and procedures

Determining whether a sale of food or beverages is taxable, zero-rated, or exempt

To apply the taxes correctly, proceed as follows:

1. Identify the product sold.
2. Determine whether it is a basic food product.
3. Check whether it falls into a taxable category, for example:

• heated food or beverage;
• alcoholic beverage;
• carbonated beverage;
• fruit-flavored beverage containing less than 25% juice;
• beverage served at the point of sale;
• beverage in an individual portion;
• confectionery;
• pudding in an individual portion;
• ice cream or similar product in an individual portion;
• water in an individual portion or flavored/carbonated water;
• snack food;
• tray of prepared foods;
• sweet baked good sold in fewer than six individual portions;
• salad;
• sandwich or similar product;
• frozen treat or similar product;
• taxable maple product;
• food or beverage sold under a contract with a caterer.

4. Check the special exceptions, including:

• products for babies;
• multipack packages;
• containers exceeding an individual portion;
• products frozen at 0 C or less;
• sales in an educational or health care establishment or by a public sector body;
• sales by a vending machine accepting only a coin of 25 C or less.

5. Apply the correct tax status:

• taxable at the applicable rate;
• zero-rated at 0%;
• exempt, if a specific rule applies.

Procedure for registrants

A registered business must:

1. collect GST and QST on its taxable sales, except zero-rated sales;
2. keep the information needed to determine ITCs and ITRs;
3. file its GST and QST returns according to the applicable frequency;
4. subtract ITCs and ITRs from taxes collected or collectible;
5. remit the difference if taxes collected or collectible are greater than ITCs and ITRs;
6. request a refund if ITCs and ITRs are greater than taxes collected or collectible.

Procedure related to ITCs and ITRs

To recover taxes paid on business inputs:

1. verify that the goods or services were acquired in the course of commercial activities;
2. determine the GST and QST paid or payable;
3. claim the ITCs and ITRs in the return for the purchase period or within the general time limit of four years;
4. apply, where applicable, the restrictions on ITRs for large businesses until December 31, 2020;
5. take into account the applicable reductions if a discount coupon reduced the taxes actually paid.

Procedure for refundable discount coupons

The retailer must:

1. calculate the taxes on the price before deducting the coupon if the taxes are not included;
2. then deduct the value of the coupon;
3. report the taxes collected without taking the value of the coupon into account;
4. submit the coupon to the manufacturer or third party responsible for reimbursement. The manufacturer may then claim the ITCs or ITRs corresponding to the taxes deemed to be included in the value of the coupon, according to the applicable fractions.

Procedure for non-refundable discount coupons

The retailer may choose one of the following two methods:

1. treat the coupon as a refundable coupon and claim the corresponding ITCs or ITRs;
2. reduce the price before calculating the taxes, without claiming any ITC or ITR on the value of the coupon.

Forms and publications mentioned

The document mentions the following publications and documents:

• General Information on QST and GST/HST (IN-203);
• CRA memorandum on GST/HST Basic Food Products (4.3);
• technical information bulletin on GST/HST Returnable Containers (B-089). No specific form other than these reference publications is mentioned in the text provided.

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Important warnings

• This publication is provided for information purposes only.
• The information it contains does not constitute a legal interpretation of the Excise Tax Act, the Quebec Sales Tax Act, or any other statute.
• In the document, the masculine form is used to designate both women and men.
• The document was prepared in collaboration with the Canada Revenue Agency.
• The HST rules may apply to Quebec businesses registered for GST/HST when they make taxable sales in the participating provinces.
• A registered business must collect GST and QST on taxable sales, except zero-rated sales.
• A person who is a small supplier may not be required to register, but certain persons must still register for the QST file, for example those who retail alcoholic beverages or tobacco.
• The person's worldwide taxable sales and those of the person's partners are used to determine the general small supplier threshold of $30,000.
• Large businesses whose taxable sales exceed $10 million are subject to special ITR restrictions until December 31, 2020.
• The general time limit to claim ITCs and ITRs is four years.
• Registrants other than charities must file their returns electronically if their annual taxable sales in Canada exceed $1,500,000, subject to the exclusions provided.
• Foods that are usually zero-rated may become taxable depending on their presentation, format, method of sale, or place of sale.
• Sales by vending machine are generally taxable, even for foods that are usually zero-rated.
• Contracts with a caterer make all foods and beverages sold under that contract taxable, whether or not service is included.
• Voluntary tips are not taxable, but mandatory service charges are.
• Gift cards and gift certificates are not taxable when sold, but taxes apply when they are used to pay for a taxable good or service.
• Refundable deposits on beverage containers are generally not subject to GST or QST.
• Some rules differ between the GST system and the QST system, notably for certain products intended for making wine or beer.

Summary

Most basic food products intended for human consumption are zero-rated, but many categories remain taxable depending on their nature, format, or method of sale. Heated foods, alcoholic beverages, carbonated beverages, confectionery, snack foods, prepared platters, salads, unfrozen sandwiches, frozen treat-type products, and foods sold by caterers are generally taxable. Individual portion thresholds are essential: less than 600 mL for beverages and water, less than 425 g for puddings, less than 500 mL or 500 g for ice cream and similar products, and less than 230 g for several baked goods. Food service establishments, vending machines, educational establishments, health care establishments, and public sector bodies are subject to special rules, including certain exemptions. Registered businesses must collect taxes on taxable sales, file their returns, claim their ITCs and ITRs within the deadlines, and take into account the restrictions applicable to large businesses. Small suppliers are generally those whose taxable sales do not exceed $30,000, but certain activities still require registration for QST. Discount coupons, gift cards, returnable containers, franchise fees, tips, and service charges each have distinct tax treatment that may alter the calculation or timing of the taxes.