GST/HST on tips and gratuities in Canada depends on whether the customer chooses the amount freely or the business adds it to the bill. A voluntary tip is generally not subject to GST/HST. A mandatory gratuity or service charge is generally part of the taxable bill. That difference affects what you charge, what appears on the receipt, and what counts toward the $30,000 small supplier threshold.
GST/HST on tips and gratuities in Canada: the basic rule
The CRA separates freely given tips from amounts a business puts on a bill.
A customer might hand a photographer $20 after a session or choose a tip after paying the invoiced amount. If the customer decides whether to tip and how much to give, the tip is generally not subject to GST/HST.
The result changes when you add an amount to the bill. A mandatory gratuity, service fee, or suggested amount added as a service charge is generally consideration for the underlying supply. If that supply is taxable and you are registered, charge GST/HST on the service charge as well as the base price.
The wording on your invoice does not override the arrangement. Calling a required fee a “tip” does not make it voluntary.
Voluntary tip versus mandatory service charge
Use the customer's actual choice as the test.
Usually voluntary:
- cash left after the bill is settled;
- an optional amount the customer enters themselves;
- a tip the customer can decline without changing the service; or
- an extra payment made after a project is complete.
Usually part of the taxable bill:
- an 18% gratuity automatically added to an event invoice;
- a required “service charge” on every booking;
- a fixed administration fee presented as a gratuity; or
- a suggested amount that your business adds to the customer's bill as a service charge.
For example, an Ontario caterer charges $100 for a taxable service and automatically adds an $18 gratuity. The taxable amount is $118. At 13% HST, the business charges $15.34 in HST, making the total $133.34.
If the same customer instead pays a $100 taxable bill, including the applicable HST, and then freely leaves $18, the voluntary $18 tip is not subject to additional GST/HST.
Do tips count toward the $30,000 GST/HST threshold?
The small supplier calculation is based on revenue from worldwide taxable supplies, including zero-rated supplies. A required service charge forms part of the amount paid for a taxable supply, so it generally counts toward the threshold.
A genuine voluntary gratuity is not consideration for the supply and generally does not enter the taxable-supplies total. Keep it separate in your records so it does not distort your threshold calculation.
This distinction matters when you are close to mandatory registration. A business with $29,000 in taxable sales and $2,000 in mandatory service charges may be over the threshold. The answer can also depend on whether the threshold was exceeded in one calendar quarter or across four consecutive calendar quarters. Read how the $30,000 GST/HST threshold works before deciding when registration starts.
What if you are not registered yet?
A small supplier that is not registered does not charge GST/HST on taxable sales, including mandatory service charges. You still need to include those required charges when monitoring taxable revenue because they can help push you over the registration threshold.
Once registered, you must charge the applicable GST/HST on taxable supplies from your effective registration date. The rate depends on the place-of-supply rules, not simply the province where your business is located. See what GST/HST rate freelancers should charge when billing customers in more than one province.
How to show tips and service charges on an invoice
Keep the receipt clear enough to show how tax was calculated.
For a mandatory charge, list:
- the base service price;
- the mandatory gratuity or service charge;
- the taxable subtotal;
- the GST/HST rate and amount; and
- the total due.
For a voluntary tip, calculate GST/HST on the taxable bill first. Record the tip separately after the customer chooses it. Do not back-calculate tax from a voluntary tip or report it as GST/HST collected.
Your normal invoice requirements still apply, including your registration number where required. The Canadian freelancer HST invoice guide covers the core fields.
A simple record-keeping workflow
Create separate bookkeeping categories for voluntary tips and mandatory service charges. Reconcile both to your payment processor, but include only taxable sales and required charges in your threshold tracking.
Use HST Hero to track the taxable revenue that counts toward registration. Enter mandatory service charges with the related sale; keep genuine voluntary tips outside that taxable-revenue total.
The practical rule is simple: customer-chosen tips are generally not subject to GST/HST, while charges added to the bill generally are. When a fee sits somewhere in between, document how customers see it and ask a Canadian tax professional or the CRA for a ruling based on the actual arrangement.