A restaurant meal in Alberta is taxed at 5%. That’s the federal Goods and Services Tax, and because Alberta is the only province with no provincial sales tax, GST is the entire tax on your bill. A $100 pre-tax tab costs $105 out the door. The same meal runs $113 in Ontario, $112 in British Columbia and Manitoba, and $115 in New Brunswick, Newfoundland and Labrador, and Prince Edward Island. Quebec lands close to $115 once federal and provincial taxes combine.
What the 5% Applies To
GST at 5% is set by section 165 of the Excise Tax Act and applies to the food-and-drink subtotal before any voluntary tip.1Department of Justice Canada. Excise Tax Act RSC 1985 c E-15 – Section 165 Your receipt shows it as a separate line, and the rate is the same whether you pick up a coffee at a drive-through or sit down for a tasting menu.
Basic groceries such as milk, bread, and raw vegetables are zero-rated, but restaurant food is specifically excluded from that treatment. The Act lists the categories that always carry the full 5%:
- Food heated for consumption.
- Salads, sandwiches, and prepared platters, unless canned, vacuum sealed, or sold frozen.
- Beverages dispensed where sold: fountain drinks, draft beer, espresso pulled to order.
- All food sold under a catering contract, regardless of what it is.
A catch-all rule then pulls in anything left over. If 90% or more of an establishment’s food and beverage sales already fall into the taxable categories above, the remaining sales become taxable too.2Canada.ca. Eating Establishments Every standalone restaurant clears that threshold, so in practice every item on the menu is taxed at 5%.3Department of Justice Canada. Excise Tax Act RSC 1985 c E-15 – Schedule VI Part III
Alcohol
Drinks at a restaurant carry the same 5% GST as food. There is no separate provincial liquor tax added at the till. Alberta collects its share upstream, through markups applied at the wholesale level by the Alberta Gaming, Liquor and Cannabis Commission when the restaurant buys its beer, wine, or spirits.4Alberta Gaming, Liquor & Cannabis. Price Your Products By the time you order a cocktail, those costs are already inside the menu price. You see the menu price plus 5%, and nothing else.
Tips and Mandatory Service Charges
A voluntary tip, left in cash or added at the card terminal, is not subject to GST. The CRA treats it as a gift from the customer rather than part of the price of the meal.5Canada.ca. GST/HST in Special Cases
A mandatory service charge is different. When a restaurant adds a fixed gratuity to a large-party bill, that amount is legally part of the consideration for the meal, and 5% GST must be collected on it. A table of eight with a $500 subtotal and a mandatory 18% service charge ($90) sees GST calculated on $590, not $500. That’s $4.50 more in tax than most guests expect, so restaurants that add these charges typically disclose them clearly on the menu.
No Provincial Sales Tax and No Restaurant-Specific Levy
Alberta has never enacted a retail sales tax on personal consumption and does not participate in the Harmonized Sales Tax system. The 5% federal GST is the only percentage-based tax on your restaurant bill.6Canada Revenue Agency. GST/HST Calculator (and Rates)
The province does charge a tourism levy, but it applies only to accommodation. Travellers sometimes confuse the two, but even after the levy increases to 6% in April 2026, it has no effect on dining bills.7Government of Alberta. Tourism Levy
Registering and Filing GST as a Restaurant Owner
Any business with more than $30,000 in taxable revenue over four consecutive calendar quarters, or in a single quarter, must register for a GST account and start charging the tax.8Canada Revenue Agency. When to Register for and Start Charging the GST/HST That threshold has not moved since the early 1990s, so virtually every restaurant qualifies within its first weeks of operation. You have 29 days after crossing the line to complete registration.
CRA assigns a reporting period based on size: monthly, quarterly, or annual. Owners can opt for more frequent filing.9Canada Revenue Agency. Reporting Requirements and Deadlines Monthly and quarterly filers submit their return and payment within one month after the period ends. Annual filers with a December 31 fiscal year have until April 30 to pay and June 15 to file. A return is required for every reporting period even if there were no sales.
Late filing triggers an automatic penalty, and interest accrues on unpaid balances at a prescribed rate tied to the basic Treasury Bill rate plus 4%.10Canada Revenue Agency. GST/HST Filing Penalties Operating without registration when you should be registered is worse: CRA can assess the GST you should have collected and remitted, plus interest, going back years.11Canada Revenue Agency. Penalties and Interest
Recovering GST Through Input Tax Credits
Registered restaurants can recover the GST they pay on business purchases by claiming input tax credits on their returns. Ingredients from suppliers, leased kitchen equipment, and rent on commercial space all carry 5% GST that can be claimed back, so the tax works as a pass-through rather than a real cost.12Canada.ca. Input Tax Credits
To qualify, the purchase must be for use in your commercial activities, you must be a registrant during the reporting period, and you need documentation. CRA’s documentation requirements scale with invoice size:
- Under $100: basic information such as supplier name, date, and total amount.
- $100 to $499.99: the above plus the supplier’s GST registration number and an indication that GST was charged.
- $500 or more: full details including the buyer’s name, a description of what was purchased, and the terms of payment.
Most registrants have up to four years to claim an ITC from the reporting period in which it first became available. Restaurants using the quick method of accounting cannot claim ITCs on operating expenses, only on larger capital purchases like equipment and vehicles. For most mid-size and larger operations, standard GST accounting with full ITC claims produces better results.
Classifying Tips for Payroll
All tips are taxable income for the person who receives them, but the CRA splits them into two categories that decide how payroll works.
Controlled tips are amounts the employer handles: mandatory service charges, auto-gratuities, or tip pools where the employer decides the split. Because the employer possesses and distributes the money, it counts as regular wages. Include it on the employee’s T4, and both employer and employee owe Canada Pension Plan contributions and Employment Insurance premiums on those amounts.13Canada Revenue Agency. Tips Received by Employees
Direct tips are voluntary payments the customer gives straight to the server, with no employer involvement in how they’re split. These don’t go on the T4, and the employer doesn’t deduct CPP or EI. The employee still has to report them on line 10400 (Other Employment Income) and can elect to pay CPP on those amounts by filing Form CPT20.
The distinction matters at audit time. If CRA decides that tips marketed as direct were actually controlled, because a manager dictated tip-out percentages for example, the employer becomes liable for both the employer and employee portions of CPP and EI on those amounts retroactively. Clear written policies and documentation that the employer does not touch direct tips are the practical defense.
Keeping Records
Every GST-registered business must keep its records and supporting documents for at least six years from the end of the last tax year they relate to.14Canada.ca. Where to Keep Your Records, for How Long and How to Request the Permission to Destroy Them Early That covers sales receipts, purchase invoices, payroll records, and bank statements. Electronic records are acceptable if they meet CRA’s standards in Information Circular IC05-1.
For a restaurant, the records auditors look at first are daily sales summaries from the POS system, supplier invoices supporting ITC claims, and tip tracking documentation showing how controlled and direct tips were classified. Destroying records early requires written permission from CRA. Without adequate records, the agency estimates the liability, and those estimates rarely favor the business.