Federal Court of Appeal Ruling: Tips, source deductions, and how to protect yourself from liability

Originally Presented: November 8, 2022


You asked, we listened! You can once again join Restaurants Canada & James Rhodes, BSc, LLB of Taxation Lawyers, for a continued conversation, on tip-out systems that protect your business from this liability!
The Federal Court of Appeal ruling recently upheld a lower court's decision regarding a Halifax restaurant's obligation to submit income tax, Employment Insurance, and Canada Pension Plan contributions on employee gratuities. This case relates to electronic tipping in the restaurant and how those tips were handled and distributed among employees. Restaurants must now submit approximately $100,000 in source deductions on electronic tips to the Canada Revenue Agency (CRA).  
As this decision is not the first time our tax courts have ruled on this issue, the case illustrates the need for restaurateurs to ensure their tip-out systems protect their business from liability. Building upon the last webinar discussion, due to popular demand and continued questions, James Rhodes, BSc, LLB, of Taxation Lawyers will be joining us again to discuss:  
  • How gratuities should be kept separate from sales revenue and payroll in a separate non-business-related account that is managed and dispersed by employees
  • Direct vs. controlled tips
  • How to protect yourself and your business from tip-out liabilities; and
  • Answer a number of frequently asked questions from the previous webinar   
James Rhodes, BSc, LLB, has been helping restaurants implement tip-out systems that make gratuity distribution as easy as possible for employees while protecting restaurants from potential liabilities associated with EI and CPP.


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Our Speakers

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James Rhodes

Taxation Lawyers

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Richard Alexander

Vice President, Atlantic Canada
Restaurants Canada

About Restaurants Canada

Restaurants Canada is a national, not-for-profit association representing Canada’s diverse and dynamic restaurant and foodservice industry. Restaurants Canada members comprise 30,000 businesses in every segment of the industry, including restaurants, bars, caterers, institutions and their suppliers. We work on their behalf with all levels of government in support of a strong restaurant industry that contributes jobs, investment, and a wide range of culinary choices to communities across the country.

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