Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Are payroll deductions required for tips when
(a) received in cash by restaurant server?
(b) included on credit card with payment of bill?
(c) included as a flat 15% gratuity fee to patron?
Position: (a) NO, no employer-employee relationship
(b) and (c) Yes, conforms to 153(1)
Reasons: section 153(1)
971070
XXXXXXXXXX C. Tremblay
Attention: XXXXXXXXXX
May 28, 1997
Dear Sirs:
Re: Payroll deductions and related reporting requirements with respect to tips and gratuities
This is in reply to your letter of April 16, 1997, requesting we confirm your understanding of the relevant provisions of the Income Tax Act and the Regulations with respect to withholding for tips and gratuities in 3 different situations.
In our view, tips left in cash on the table by a restaurant patron do not meet the provisions of subsection 153(1) of the Act and the employer is not required to withhold. However, where the restaurant patron settles his bill with a major credit card and includes an amount as gratuity on the card or where the restaurant owner bills the patron for the cost of the food and beverage and includes 15% gratuity for the staff, the requirements of subsection 153(1) of the Act are met.
This opinion is based solely on the facts presented and is not a ruling. In accordance with the guidelines set forth in Information Circular 70-6R3, it is not binding on the Department.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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