Common Questions about Liquor Consumption Tax
What is the LCT rate and how is it charged?
The Liquor Consumption Tax (LCT) rate of 10 per cent applies to the total selling price of beer, wine and spirits, including charges for the right to consume alcohol in a licensed establishment, such as Bring Your Own Wine (BYOW) charges. The total sale price of alcohol consumed on licensed premises includes any fee for mixes and corkage that relate to the sale of the alcohol. It is not permissible to reduce the amount of tax payable by levying a separate fee for mix, corkage or similar charges.
As discussed in more detail below, the LCT of 10 per cent also applies to:
Why do I need to keep detailed records?
Licensed vendors are required to keep detailed accounting records for audit verification purposes. All alcohol purchased for resale with an LCT Special Licence is purchased tax free which means the licensed vendor is responsible for keeping records to maintain an accurate account of how the alcohol is sold or used in their business operations. These records must include a detailed account of all sales, promotional giveaways, own consumption, spillage and theft.
All the alcohol purchased by a licensed vendor is considered to be sold at a retail sale price unless detailed records are maintained to explain the difference between the amount of alcohol purchased and the amount sold. Records must be maintained for at least six years and you are not authorized to destroy records that are less than six years old unless first obtaining permission from the Revenue Division.
A listing of required records can be found in the Attachment to Information Bulletin LCT-1, The Liquor Consumption Tax
How does tax apply on promotional give aways and alcohol for own consumption or used for cooking?
Providing the usage amounts are reasonable, tax will apply on the total cost to purchase the alcohol and not the normal retail sale price for any alcohol that is used in a promotional give away or consumed in the normal business operations.
Do I need to keep track of spillage/breakage/theft?
It is generally understood that normal business operations may include a small amount of liquor loss via spillage or breakage. In these limited instances it is considered that no consumption has occurred and consequently no tax is due on these types of losses provided the amounts are reasonable and a record of the larger loss instances is maintained to provide an account for audit verification. In the case of theft, a copy of the police report detailing the loss must be maintained on file.
Do I need to keep track of bottle deposits for off-sale?
To help ensure that you do not over-remit LCT, the refundable deposits and environmental handling charges on beverage containers are to be deducted from the total sale price before calculating the tax on off-sale. Please refer to Information Bulletin LCT-1, The Liquor Consumption Tax for a listing of all beverage container and environmental handling rates.
What is a resale levy?
A resale levy must be collected on the sale of alcohol sold to Special Occasion Permit holders who then resell the product under open pricing for community social functions and fundraising events for non-profit groups, sports clubs and educational groups. The resale levy is in addition to the LCT, GST and deposits and represents the average markup for those products when sold by the Special Occasion Permit Holder.
How do I calculate and report a resale levy?
The resale levy is calculated by applying the appropriate percentages as follows:
Since the resale levy is separate from the LCT you collect, you must report it as item three on your LCT return.