When a business sells food and drink and is paid in Canadian currency, what amount is the sales tax figured on, and how must it be remitted?

Plain-English summary

Scives, Inc., operating the Chalet Motel tavern near the Canadian border, is paid mostly in Canadian currency. Prices are stated in Canadian dollars, employees knowingly accept the Canadian money (giving change in Canadian money too), and they keep records of the total Canadian dollars taken in and the equivalent US-dollar value. Scives asked how to figure and remit the sales tax on these sales.

The Department held the tax is figured on the US-dollar value of the Canadian money when received, and must be paid over in US dollars.

• Food and drink are taxed at 4%. Section § 1105(d)(i) taxes the receipts from sales of food and drink at four percent.
• "Receipts" are valued in money. Under § 1101(b)(3), receipts are the sale price "valued in money, whether received in money or otherwise." Canadian currency is property received "otherwise" than in US money, so it is measured by its US-dollar value.
• Use the value when delivered. The proper tax base is the value of the Canadian money at the time it is delivered to Scives — not its face amount in Canadian dollars.
• Remit in US legal tender. Whatever currency the customer pays in, the tax owed to the Tax Commission must be paid in United States legal tender.
• Records and a presumption. Section § 1135(a) requires records of every sale and the tax due. On audit, records showing receipts in "dollars" are presumed to be US dollars; to rebut that, Scives must keep detailed per-sale records showing the nature of the currency actually received.

What this means for you

Foreign currency is measured in US dollars at the moment you take it in. If a customer pays in Canadian (or any foreign) money, convert to its US-dollar value at the time of the sale and figure the tax on that — not on the foreign face amount, which isn't equivalent.

You still owe and remit the tax in US dollars. Accepting foreign money for convenience doesn't change how you pay the state; the remittance must be in US legal tender.

Document the currency, or the state assumes US dollars. Books that just say "dollars" will be read as US dollars on audit. If a meaningful share of your receipts is in foreign currency, keep per-sale records identifying the currency and its US-dollar value to support the numbers you report.

Common questions

Q: A customer pays in Canadian dollars. What do I base the tax on?
A: The US-dollar value of that Canadian money at the time it's delivered to you — not the Canadian face amount. Food and drink are then taxed at 4% (§ 1105(d)(i)).

Q: Can I remit the tax in Canadian dollars since that's what I collected?
A: No. The tax must be paid to the Tax Commission in United States legal tender.

Q: What records do I need?
A: Section 1135(a) requires records of every sale and the tax due. Because "dollars" is presumed to mean US dollars, keep detailed per-sale records showing when receipts were in foreign currency and their US-dollar value.

Citations and references

Statutes:

• Tax Law § 1105(d)(i) — 4% tax on receipts from sales of food and drink
• Tax Law § 1101(b)(3) — definition of "receipts" (sale price valued in money, whether received in money or otherwise)
• Tax Law § 1135(a) — records of every sale and the tax payable; audit presumption that "dollars" means US dollars

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1983.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a83_9s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-83(9)S
Sales Tax
March 8, 1983

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S820609A

On June 9, 1982, a Petition for Advisory Opinion was received from Scives, Inc., Chalet
Motel, Route 11, Potsdam, New York 13676.
Petitioner inquires as to the proper sales tax to be collected on transfers made in exchange
for foreign money.
Petitioner operates a tavern located near the Canadian border. The majority of his customers
are Canadians who pay for their purchases in Canadian currency. Petitioner states that the prices
established for all beverages are stated in Canadian dollars, and that his employees are aware of this
fact and accept the currency with knowledge that it is not the equivalent of U.S. currency. All
transactions with the Canadian customers are handled in Canadian currency; i.e., if a customer
presents Canadian money in payment of a purchase and if he is entitled to any change, he would
receive his change in Canadian currency. Further, the employees are required to maintain records
showing the total Canadian dollars received and the equivalent value in U.S. dollars. For record
keeping purposes, employees are required to maintain accurate records showing total Canadian
monies received, bank charges and true U.S. dollar value.
The receipts from Petitioner's sales of food and drink are subject to a tax of four percent upon
the "receipts" from sales of food and drink. Tax Law, §1105(d)(i). The term "receipts" is defined,
in section 1101(b)(3) of the Tax Law, as "The amount of the sale price of any property and the
charge for any service taxable under this article, valued in money, whether received in money or
otherwise . . . . "
Accordingly, where Petitioner makes sales of food and drink in exchange for Canadian
money, it is the value of such Canadian money at the time delivered to Petitioner that is the proper
base for computing the sales tax due. The tax to be remitted to the Tax Commission, however, must
be in the form of United States legal tender.
Section 1135(a) of the Tax Law provides that "Every person required to collect tax shall keep
records of every sale and of all amounts paid, charged or due thereon and of the tax payable thereon
" Upon an audit, records indicating receipts in the form of "dollars" will be presumed to have been
in the form of United States dollars. In order to rebut such presumption Petitioner should maintain
detailed records of every sale, with respect to the nature of the receipt in each case, as required by
section 1135(a) of the Tax Law.
DATED: February 18, 1983

s/FRANK J. PUCCIA
Director
Technical Services Bureau

ROBERT W. BOUCHARD, ACTING COMMISSIONER
GABRIEL B. DiCERBO , DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (8/82)