Restaurant Owners Who Buy from The Beer Store Will Face Increased CRA Scrutiny

Ontario restaurant and bar owners are likely the latest target of the Canada Revenue Agency’s (the “CRA”) effort to audit unreported or under-reported income tax or GST/HST. The CRA requested customer information from The Beer Store in order to identify potential variance between reported revenue and actual revenue.

Section 289(3) of the Excise Tax Act and Section 231.2 of the Income Tax Act (collectively, the “Acts”) allow the CRA to apply to the Federal Court (the “FC”) for an order requiring a third-party to provide information on unnamed persons where the CRA can satisfy the court that the unnamed person(s) is ascertainable and that the request is made to verify compliance with the Acts.

On May 1, 2018, the CRA obtained an order from the FC requiring The Beer Store to disclose: i) the identities of all The Beer Store’s restaurant and bar customers and ii) all documents relating to those customers for the period beginning October 1, 2017 and ending December 31, 2022.

Accordingly, the CRA is likely to launch income tax or GST/HST audits based on the projected revenues calculated from the Beer Store information they receive. This means greater scrutiny and greater tax peril for Ontario restaurant and bar owners.

One potential solution for those effected is to remedy any tax issues under the Voluntary Disclosures Program (the “VDP”). VDP participants will be offered the opportunity to limit their exposure to severe interest rates and penalties by proactively remedying any variance in their income tax or GST/HST reporting.

Whether you are an Ontario restaurant or bar owner seeking to reduce your exposure through participation in the VDP or have found yourself facing a CRA audit, the specialists at TaxChambers LLP can help.

by David Piccolo & Joe Wahba