This Notice clarifies how Retail Sales Tax (RST) applies when prepared food products are provided without specific charge:
- by qualifying institutions for distribution to others,
- by qualifying institutions to their employees,
- by schools and universities to the students.
Background
Prepared foods sold by eating establishments are taxable at the rate of 8 per cent when the total charge, in any one transaction, is more than $4.00, excluding the federal Goods and Services Tax (GST). However, certain exemptions exist under the RST Act when prepared foods are provided without specific charge.
RST Application
Hospitals, nursing homes and homes for the aged, penal or correctional institutions, and religious, charitable or benevolent organizations may purchase prepared foods, to be provided to others free of charge, exempt from RST. The exemption extends to prepared foods that are purchased from an outside food service company for consumption in hospitals, nursing homes and homes for the aged, penal or correctional institutions and religious, charitable or benevolent organizations.
Employers, schools and universities
There is an exemption from paying RST for prepared foods provided by employers to their employees free of charge and for prepared foods provided by schools and universities to students free of charge in an eating establishment operated by or on behalf of the employer, school or university.
The prepared meals that are provided to the employees or students free of charge can be prepared in the cafeteria or prepared off-site for service to any premise or location to which the caterer is contracted to manage.
To qualify for the exemption for meals prepared on behalf of the employer, school or university, a food service company is required to be contracted by the employer, school or university to manage the operation of a cafeteria on a frequent, ongoing basis (i.e., daily meals).
How to Claim the RST Exemption
To purchase prepared foods exempt from RST, qualifying institutions must provide the supplier with a valid Purchase Exemption Certificate.
RST Refunds
Where RST has been paid in error, the purchaser may apply to the ministry for a refund of the RST. Refund applications must be received by the ministry within four years from the date RST was paid.
For More Information
For more information, please contact the nearest Ontario Ministry of Finance Tax Office listed under Taxes - Provincial (Retail) Sales Tax in the blue pages of your telephone directory, or visit our website at ontario.ca/finance.
