Wilson Wu
Chief Revenue Officer, Snappy
British Columbia’s employer health tax exempts employers whose B.C. remuneration is $1,000,000 or less. Above that, you pay 5.85% of the amount over $1,000,000, and past $1,500,000 the calculation switches to 1.95% of your total. The trap for restaurant owners is association: if you run a restaurant and a banquet hall in two companies, the province tests the combined payroll.
That last sentence is the one that costs money in Surrey. A single dining room rarely crosses $1,000,000 in payroll.
An owner with a restaurant in one numbered company and a hall in another crosses it constantly, and finds out in March. Here is the arithmetic, the association rule in the province’s own words, and the payroll numbers you should be able to pull any day of the year instead of reconstructing them at filing time.
This is general information for operators, not tax advice. Confirm your own position with your CPA before you file.
Summary
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The employer health tax is an annual tax on an employer’s B.C. remuneration paid to employees and former employees in a calendar year, in force since January 1, 2019 (Government of B.C.). It is not a payroll deduction. Nothing comes off the server’s cheque; the restaurant writes it.
Who pays comes down to one number: your B.C. remuneration for the calendar year. The province defines that as everything you pay to employees who report for work at your permanent establishment in B.C., plus anything paid from or through that establishment to employees who report nowhere (Government of B.C.). Where the employee lives is irrelevant.
Employers with B.C. remuneration greater than the exemption amount must register for the tax (Government of B.C.), which answers the question most owners actually ask: do I have to pay this? Below it, most independent restaurants have nothing to register and nothing to pay, which is exactly why the association rule catches so many owners off guard.
The 2026 brackets have three bands: no tax at $1,000,000 or less, 5.85% of the amount over $1,000,000 up to $1,500,000, and 1.95% of total B.C. remuneration above $1,500,000. The province publishes worked examples for all three, reproduced here so you can check your own number against theirs.
| B.C. remuneration | What you pay | The province's own worked example |
|---|---|---|
| $1,000,000 or less | Nothing. You are exempt | Employer A pays $850,000. Below the exemption, so no employer health tax |
| $1,000,000.01 to $1,500,000 | 5.85% x (B.C. remuneration - $1,000,000) | Employer B pays $1,200,000. Tax is 5.85% x ($1,200,000 - $1,000,000) = $11,700 |
| Greater than $1,500,000 | 1.95% x total B.C. remuneration | Employer C pays $1,550,000. No exemption applies. Tax is 1.95% x $1,550,000 = $30,225 |
All three rows are stated on the province’s employer health tax overview (Government of B.C.).
Operators often assume the jump from 5.85% to 1.95% on the full payroll creates a cliff at $1,500,000. It does not.
Run both formulas at exactly $1,500,000: the notch rate gives 5.85% x ($1,500,000 – $1,000,000) = 5.85% x $500,000 = $29,250, and the upper rate gives 1.95% x $1,500,000 = $29,250. Identical. The two bands are designed to meet.
The band that does bite is the first one, and it bites gently. Take a restaurant at $980,000 of B.C. remuneration that gives a 3% raise across the board.
New payroll is $980,000 x 1.03 = $1,009,400. The excess over the exemption is $9,400, so the tax is 5.85% x $9,400 = $549.90.
Crossing the line for the first time costs a few hundred dollars, not a mortgage payment. Those figures are an illustration, not the province’s.
Part-year employers prorate. If you open or close a B.C. establishment mid-year, both the $1,000,000 exemption and the $1,500,000 threshold are scaled by days with a permanent establishment in B.C. divided by 365 (Government of B.C.). Anyone opening a second location in 2026 needs to raise that with their accountant before December.
The associated-employer trap is that two companies under common control are tested together on December 31 and share one exemption instead of each getting their own. “If you’re associated with one or more employers on December 31, you’re considered to be an associated employer for the purposes of the employer health tax. … Associated employers are required to share any exemption amount they may qualify for” (Government of B.C.).
Association is not about brand, signage or menu. The province applies section 256 of the federal Income Tax Act with modifications, extended to include individuals, partnerships and trusts, and looks at who controls what (Government of B.C.).
Two corporations controlled by the same person are associated. So are two corporations controlled by different but related people where one of them owns at least 25% of any class of shares of each.
Then the group is tested as a unit. Combined B.C. remuneration of $1,000,000 or less: nobody pays.
Between $1,000,000.01 and $1,500,000: the group is eligible for one $1,000,000 exemption, must have an agreement allocating it, and each employer with B.C. remuneration greater than its allocated share pays 5.85% on the difference. Greater than $1,500,000: “You are not eligible for the exemption amount for the calendar year” and each employer pays 1.95% of its own B.C. remuneration (Government of B.C.).
The December 31 test is the part worth circling. It is a snapshot date, and it decides the treatment of the entire calendar year that preceded it.
Running a restaurant and a banquet hall as separate companies?
We'll walk through your hours and sales across both entities on your own numbers, so you can see where the group stands before filing season.
Show me my numbersCombining a $700,000 restaurant with a $600,000 hall pushes the group past the $1,000,000 exemption, creating $17,550 of tax that neither owed alone. Both figures are illustrative; here is what changes once the two are associated.
| Scenario | B.C. remuneration tested | Exemption available | Employer health tax |
|---|---|---|---|
| Restaurant filing alone | $700,000 | $1,000,000 | $0, below the exemption |
| Banquet hall filing alone | $600,000 | $1,000,000 | $0, below the exemption |
| The two as an associated group | $1,300,000 combined | One $1,000,000 exemption, shared | 5.85% x ($1,300,000 - $1,000,000) = 5.85% x $300,000 = $17,550 |
Read the direction of that carefully. Separately the group owes nothing. Together it owes $17,550, and no revenue changed, no hire happened, nothing about the operation moved. Only the test did.
The allocation of the shared exemption is not cosmetic either. Suppose the group allocates $700,000 of the exemption to the restaurant and $300,000 to the hall. The restaurant pays 5.85% x ($700,000 – $700,000) = $0 and the hall pays 5.85% x ($600,000 – $300,000) = $17,550. Group total, $17,550.
Now reverse it: $700,000 to the hall and $300,000 to the restaurant. The hall only has $600,000 of remuneration, so $100,000 of exemption goes unused.
The restaurant pays 5.85% x ($700,000 – $300,000) = $23,400 and the hall pays $0. Group total, $23,400.
The same payroll, the same rate, $5,850 more tax, because 5.85% x $100,000 = $5,850 of exemption was left on the table. Allocate to the entity that can actually absorb it.
If those same two entities grow past $1,500,000 combined, the exemption disappears for both and each pays 1.95% of its own remuneration (Government of B.C.). On $1,600,000 of combined payroll that is 1.95% x $1,600,000 = $31,200 across the group, up from $29,250 at $1,500,000. Again, illustrative figures on the province’s stated rates.
This is the restaurant-specific question, and the answer changes your total. The province says whether the employer health tax applies to a gratuity depends on who facilitates the payment: “When the gratuity or tip is paid by the employer to the employee, employer health tax applies in the year the gratuity or tip is paid to the employee,” and “If the gratuity or tip is paid directly from the customer to the employee… the employer health tax does not apply” (Government of B.C.).
The province lists the taxable versions plainly. A mandatory service charge the employer adds to cover tips. A percentage the employer adds to the bill to cover tips. Tips allocated using a tip-sharing formula determined by the employer. Tips run through business income and redistributed as pay. Cash tips banked into the employer’s account and paid back out.
And the versions that are not taxable. A customer leaves money on the table and the server keeps it. The employees, not the employer, decide how tips are pooled and shared. A customer tips on the card and the employer returns that amount in cash to the employee at the end of the shift, or the next day when there was not enough cash on hand.
Banquet operators should read that first list twice. A mandatory service charge on a 250-guest wedding is not a tip for this purpose; it is remuneration when you pay it out, and it lands in the same number that decides whether your group clears $1,000,000. Vacation pay, bonuses, commissions and directors’ fees are in there too (Government of B.C.).
The employer health tax is not the whole payroll picture; it is the third line on a bill that has been rising for years. The first line is the wage floor.
B.C.’s general minimum wage is $18.25 per hour as of June 1, 2026, and since June 1, 2024 each minimum wage has gone up every year by the same percentage as the BC All-Items Consumer Price Index, rounded to the nearest 5 cents (Government of B.C.). That is a payroll line indexed to inflation, and it compounds across a full year of scheduled hours.
The second line is WorkSafeBC. Premiums are set by classification unit, so the only rate worth planning against is your own; get it from WorkSafeBC rather than an industry average. Worth knowing where the claims come from: WorkSafeBC’s kitchen safety series states that more than 60 percent of injuries in the food service industry involve kitchen workers (WorkSafeBC, 2018) (WorkSafeBC).
All three move with the same underlying number, and margins are thin enough that they matter. Restaurants Canada put it bluntly this spring: 36 per cent of operators are either losing money or just breaking even (Kimberley Bulletin). A $17,550 surprise in March is a real event at that margin.
The practical consequence is that a raise, a new hire or a banquet season with heavy overtime is no longer a single-line decision. In a group approaching $1,000,000 combined, it is also a tax decision, and you want to see it coming in July rather than learn about it the following spring.
Four numbers, per entity, running total for the calendar year: wages and salaries paid, vacation pay paid, bonuses and commissions paid, and employer-facilitated tips and service charges paid out. Add them per company, then add the companies together. That is your test.
The problem is rarely that the numbers do not exist. It is that they live in four places: a scheduling app for the restaurant, a spreadsheet for the hall, the payroll provider’s year-end file, and the owner’s head. Nobody can answer “where is the group tracking against $1,000,000 right now” in September, so nobody asks until the accountant does.
| Where labour numbers live | What you can see in September | What March looks like |
|---|---|---|
| Paper schedules and a shoebox | Nothing you would act on | Your accountant rebuilds the year from bank statements |
| Payroll provider's reports only | Last completed pay period, one entity at a time | Accurate, but the first time you see the group total is at filing |
| A scheduling tool that does not talk to the register | Scheduled hours, not paid dollars, and no link to sales | Reconciliation by hand between two systems |
| Clock-in and clock-out in the Snappy Team App, with live sales and multi-location switching in one login | Hours clocked and live sales, without a separate login per store | Your labour and sales side is already current, so your accountant reconciles against payroll instead of rebuilding the year |
Snappy sits in that last row. Staff clock-in and clock-out live in the Snappy Team App, on the same Snappy system the point-of-sale rings the sales into.
The Team App also puts live sales and month-over-month comparison in the owner’s pocket, with multi-location switching instead of a separate login per store, and analytics and reports hold the sales history beside it. Scheduling does not have to sit outside that either: Snappy connects to staff and shift management, so scheduled hours can feed the same system the sales run through.
To be clear about the boundary: Snappy does not calculate your employer health tax and is not a payroll or tax product. What it gives you is live sales and labour data, and reporting that covers sales by location, hourly sales and product mix, so the labour and sales picture your CPA asks for is one you have been watching all year.
Five questions, and none of them takes long if your numbers are current.
Are my companies associated for employer health tax purposes on December 31? This is the whole ballgame for a multi-entity owner, and it is a legal test on control and share ownership, not a judgement call about how the businesses feel.
If we are, who is allocated how much of the $1,000,000 exemption, and is there a written agreement? The province requires an agreement to share the exemption among the group (Government of B.C.), and as shown above, a poor allocation wastes exemption room outright.
Which of our tips and service charges are employer-facilitated? Take the province’s own two lists to the meeting rather than a description of your practice.
Do we owe instalments this year? If your employer health tax in the previous calendar year exceeded $2,925, quarterly instalments are mandatory, based on the lesser of 25% of the previous year’s tax or 25% of the current year’s estimated tax (Government of B.C.). Working backwards through the notch formula, $2,925 of tax corresponds to 5.85% x $50,000, which is a B.C. remuneration of $1,050,000. Clear $1,050,000 and instalments are in your future.
What are our dates? For the 2026 calendar year the province lists instalment due dates of June 15, September 15 and December 15, 2026, a registration deadline of December 31, 2026 for first-year payers, and a return and final payment deadline of March 31, 2027 (Government of B.C.). Interest is charged on instalments paid late.
One more thing to bank: the B.C. employer health tax is deductible from business income for income tax purposes (Government of B.C.). That does not make it free. It does change the after-tax number your accountant should be modelling.
No. Employers with B.C. remuneration of $1,000,000 or less are exempt (Government of B.C.). The exception is association: if that restaurant is associated with another employer on December 31, the exemption is tested against the group’s combined B.C. remuneration, not the restaurant’s alone.
Between $1,000,000.01 and $1,500,000 the tax is 5.85% x (B.C. remuneration – $1,000,000). Above $1,500,000 there is no exemption and the tax is 1.95% x total B.C. remuneration (Government of B.C.).
It applies wherever the control tests are met, and the province extends the association rules to individuals, partnerships and trusts, not just corporations (Government of B.C.). Whether your specific structure is associated is a question for your CPA, and it is worth asking before December 31 rather than after.
The province is explicit that the two are not the same thing: “The employer health tax is separate and distinct from remitting source deductions or MSP premiums” (Government of B.C.). Treat it as its own annual filing with its own dates.
It depends who facilitates the payment. A mandatory service charge or an employer-determined tip-sharing formula is remuneration when the employer pays it to the employee. A tip the customer hands the server directly, or a pool the employees themselves control, is not (Government of B.C.).
One restaurant under $1,000,000 of payroll owes nothing. Two companies under one owner get tested together, and the moment their combined B.C. remuneration crosses $1,000,000 the group starts paying 5.85% on the excess. On an illustrative $700,000 restaurant and a $600,000 hall, that is $17,550 that neither entity would have owed alone. Past $1,500,000 combined, the exemption disappears entirely and both pay 1.95% of their own payroll.
Two things follow. Ask your CPA the association question before December 31, because that is the date the province tests, and allocate the shared exemption to the entity that can actually use it. Then decide what your tip and service charge practice really is, because the province cares who facilitates the payment, not what you call it.
The rest is bookkeeping discipline. If you can see hours clocked and sales per location on any given Tuesday, none of this is a surprise, and your accountant is checking a number rather than rebuilding one. If you cannot, March does the work for you, at the worst possible time of year.
Know your hours clocked and your sales per location every day, not once a year. Talk to our team about what that looks like across two entities on one system.
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