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A restaurant has to keep its books for six years from the end of the last tax year they relate to, and those books must show every sale, every purchase invoice, the payroll and the tax you collected. The tricky parts are tips, the GST/HST on service charges and food cost. Get those three right and the rest is routine bookkeeping.
What records does a restaurant have to keep?
The CRA wants records that let anyone rebuild your income and expenses. In a restaurant that means daily sales summaries from the till, supplier invoices, bank and card statements, payroll records and your GST/HST returns. If you claim input tax credits on what you buy, keep the purchase invoices or receipts that support each claim. The six years can be on paper or in a readable electronic file, but they have to stay in Canada. The CRA’s own wording on that point is that records kept outside of Canada and accessed electronically are not considered kept in Canada, so a cloud service with servers abroad is worth a second look.
| Record | Why you need it |
|---|---|
| Daily sales report and card batches | Ties the till to the bank deposit |
| Supplier invoices | Supports food cost and input tax credits |
| Payroll registers and tip records | Supports remittances and T4s |
| GST/HST returns and workings | Shows how you got the tax figure |
| Bank and card statements | Backs up everything else |
Nothing on that list is exotic. What trips restaurants up is that a busy Saturday pushes the paperwork to next week, and next week never comes.
How do you handle tips and service charges?
The answer depends on who controls the money. A direct tip goes from the customer to the server and you never touch it. You don’t withhold tax, CPP or EI on it and you don’t put it on the T4, though the server still reports it.
A controlled tip is different. If you collect it, pool it or add a mandatory service charge and then pay it out, it counts as pay. You deduct income tax, CPP and EI and report it on the T4. The CRA defines controlled tips as tips that an employer controls or possesses and then must pay to the employee, which is a handy test: if the money passes through your till or your bank account on its way to the server, treat it as pay.
The GST/HST side has its own rule. A gratuity a customer gives voluntarily isn’t taxable. If you put a charge on the bill as part of the price of the service, tax applies to it. So a 15% charge added automatically to a large party’s bill is taxable, and the tip a customer writes in on the card slip is not.
What does staff cost once you add the employer share?
Take eight servers paid $1,200 each every two weeks in Ontario. The payroll remittance calculator puts the amount you send to the CRA each pay period at $2,209.30. That’s $819.50 of income tax, $507.12 of CPP and $156.48 of EI held back from the staff, plus your own share of $726.20. The full cost of that payroll is $10,326.20 for the period.
That last figure is what the owner should budget, not the $9,600 of gross pay. Workers’ compensation isn’t in the calculator, so add it if it applies to you. For an individual server’s take home after those deductions, the take-home pay calculator does the same job from the other side.
How do you check that your menu makes money?
Bookkeeping isn’t only compliance. Cost each plate. If a dish costs $6.50 to make and sells for $19, you keep $12.50, which the profit margin calculator shows as a 65.8% gross margin and a 192.3% markup. Then compare that with what the books say your food cost was last month. A gap points to waste, theft or a supplier price that crept up.
Track it weekly, not once a year. Food cost that looks fine over twelve months can hide three bad weeks, and the owner who finds out in March can’t do anything about January.
What does GST/HST look like on a big order?
Say you cater a $2,400 event in Ontario. The GST/HST calculator adds $312 of HST at 13%, for a $2,712 total. That $312 isn’t yours. It sits in a separate account until you remit it. If all you have is a till total with tax already inside, the HST reverse calculator backs the tax out.
How often you file depends on revenue. The CRA assigns an annual period at $1.5 million of taxable supplies or less, quarterly above that up to $6 million, and monthly above $6 million. You can elect to report more often. Monthly and quarterly returns are due a month after the period ends. Annual filers get three months after the fiscal year end.
What should a closing routine look like?
Most restaurants that keep clean books do the same few things every night, and it takes about twenty minutes. Print the sales report and count the drawer. Note any voids, comps and refunds with the manager’s initials. Record the tips paid out, split between direct and controlled. Put the deposit slip with the report.
Then once a week, match the card processor’s batches to the bank. Here’s why it matters. Say you ran $2,000 of card sales and the processor takes a 2% fee (an assumed rate, yours will differ). The deposit is $1,960, not $2,000. Book the full $2,000 as sales and the $40 as a bank charge, or your sales will look too low and your costs too high.
What mistakes do restaurants make most?
Mixing personal spending into the business account is the first. The second is deducting all of a meal. The 50% limit on meals and entertainment doesn’t apply to food you provide to customers for pay and bill them for, but it can apply to other food you buy for the owner or for business talks. Staff meals and events have their own wrinkles, so read the CRA’s guidance before you claim them in full.
Third is treating a card processor’s deposit as sales, which the example above shows. And fourth, paying a cook in cash from the till without writing it down. That one breaks your payroll records and your sales tie-out at the same time.
Provincial rules on restaurant meals and liquor aren’t covered on this page, and software prices change too often to quote. Ask your accountant what applies in your province.
Sources, and how we checked them
Record keeping, tip treatment, GST/HST reporting periods and the meals limit come from Canada Revenue Agency guidance. The payroll, margin and tax examples use the 2026 settings of the calculators on this site. This is an independent information site, not a government service.
Frequently asked questions
How long must a restaurant keep its records?
Six years from the end of the last tax year they relate to, unless the CRA gives permission to destroy them earlier.
Do I withhold tax on tips?
Not on direct tips paid by the customer to the server. You must on controlled tips you collect or pool and then pay out.
Is GST/HST charged on a tip?
Not when the customer gives a voluntary gratuity. It applies if you include a charge in the price of the service on the invoice.
Can I deduct 100% of restaurant meals I buy?
The general limit is 50%. It doesn't apply when your business provides food to customers for pay and bills them for it.
How often do I file GST/HST?
The CRA assigns annual, quarterly or monthly periods by taxable revenue, and you can elect to file more often.
- Self-employed taxes in Canada: income, CPP and GST
How tax works when you are self-employed in Canada: reporting income and expenses, paying both halves of CPP, instalments and when to register for GST