Input Tax Credits for Restaurants: Don’t Miss These GST/HST and QST Claims on Supplies — CPA Firm Near You, Montreal

Introduction

Restaurants pay significant sales tax on food supplies, beverages, equipment, cleaning products, packaging, and operating expenses. The good news is that most of these taxes can be recovered through Input Tax Credits (ITCs) for GST/HST and Input Tax Refunds (ITRs) for QST. Unfortunately, many restaurant owners miss large amounts of recoverable tax because of poor documentation, misclassified expenses, or simply not knowing the rules. This guide explains how ITCs and ITRs work, which purchases qualify, and how a CPA firm near you in Montreal can help you recover money while staying fully compliant.

Legal and Regulatory Framework

Under the Excise Tax Act and Quebec’s Taxation Act, businesses registered for GST/HST and QST can recover the tax paid on eligible commercial activities. To claim ITCs and ITRs, restaurants must keep invoices showing the supplier’s GST/QST numbers, tax amounts, business purpose, and date of purchase. Expenses must be incurred to earn commercial revenue and must not fall under restricted categories such as personal expenses or exempt supplies. Restaurants must file returns on time, maintain organized records, and reconcile tax paid against tax collected. Revenu Québec and CRA require that claims be supported by documentary evidence, or they may deny the credits.

Key Court Decisions

Courts have ruled that ITCs can be denied when invoices are incomplete, missing tax numbers, or do not demonstrate a business purpose. Several decisions confirm that businesses must prove they actually received the goods or services claimed. In other cases, courts supported CRA’s denial of ITCs because the taxpayer failed to demonstrate that the supplier was legitimately engaged in commercial activity. Judges emphasize that the burden of proof for ITCs lies entirely with the business making the claim.

Why CRA and Revenu Québec Target ITCs for Restaurants

Restaurants are frequently audited because they have high-volume purchases and many small invoices. Missing receipts, handwritten supplier bills, or undocumented cash purchases raise immediate red flags. CRA and Revenu Québec also compare ITC claims to industry averages; unusually high or low amounts can trigger investigations. Claims involving alcohol purchases, kitchen equipment, or mixed-use items are often scrutinized to ensure they relate to taxable business activities.

Mackisen Strategy

At Mackisen CPA Montreal, we help restaurants maximize their recoverable ITCs and ITRs while staying fully compliant. We build structured filing systems, digitize and categorize supplier invoices, verify tax numbers, and ensure all records meet CRA and Revenu Québec requirements. Our team reconciles sales tax collected versus paid, identifies missed credits, and prepares accurate GST/QST returns. If your restaurant faces an audit, we prepare your documentation, defend your claims, and negotiate on your behalf to minimize reassessments.

Real Client Experience

A Montreal restaurant repeatedly missed ITC claims on cleaning supplies, alcohol used for cooking, delivery packaging, and small equipment. After reviewing their expense records, we uncovered several years of unclaimed amounts and filed adjustments that led to substantial refunds. We then implemented a digital invoice workflow that helped the restaurant stay compliant and recover all eligible taxes moving forward.

Common Questions

Which restaurant purchases qualify for ITCs and ITRs?

Most business-related purchases including food supplies, beverages, equipment, cleaning products, tableware, packaging, and utilities qualify if properly documented.

Can I claim GST/QST on alcohol purchases?

Yes, if the alcohol is used for business purposes such as cooking or resale, provided documentation is clear.

What happens if an invoice is missing the supplier’s tax number?

CRA and Revenu Québec may deny the credit unless corrected documentation is obtained.

Can ITCs be claimed retroactively?

Yes, adjustments can be filed within the statutory time limits to recover missed credits.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses stay compliant while recovering the taxes they’re entitled to. Whether you’re filing your first GST/QST return or optimizing multi-year refunds, our expert team ensures precision, transparency, and protection from audit risk.