Canada Revenue Agency wants to make the national gambling field safe for everyone and one of the ways it is able to do so is via the taxable income of the workers relying on gambling operation for their income. Cheng Xia part of the Grand Villa Casino Burnaby staff managed to nearly double his annual salary and as a result, now slot machine attendants are legally obliged to report their tips as taxable income.
Canada lawmakers have worked hard in order to come up with a set of rules regulating the workforce and especially the additional payments workers are able to receive during their work. The so-called controlled tips are considered taxable, as they are controlled by the employer and are part of the total remuneration. On the other hand, direct tips are something different.
Tips and Gratuities
Direct tips are the ones customers give to the employee directly by leaving them on the table when it is a waiter or giving them to the door person. This type of tips is not subject to Canada Pension Plan contributions or Employment Insurance Act premiums. It is up to the worker whether they would report the said income as taxable or not.
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Now the Canada Revenue Agency won in court and would make it mandatory for the slot machines attendants of Canadian casino locations to pay taxes on the tips they are able to receive while working on the casino floor. What triggered the conversation was an individual of Burnaby associated with Grand Villa Casino. Cheng Xia has been part of the casino structure ever since 1999.
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The beginning of his casino career was as a dealer, later on, upgraded to a slot attendant with even greater responsibilities. The time window in question cited in the lawsuit was 2011 and 2012. Mr. Xia failed to introduce the tips he received as taxable income because they more than doubled his annual wage.
Doubling of Income with Tips
The reported income amounted to CA$27,011 in 2011 and CA$29,327 in 2021, but in the meantime, direct tips coming from customers have also increased. The year 2011 managed to bring him tips reaching CA$23,937, whereas the following year was even more generous to Mr. Xia and netted him CA$39,219. The tax agency found out about the additional cash payments he had received and claimed that he pays tax on them.
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In response, the slot machine attendant stated in court that this amount of money is non-taxable, as they were often small portions of a jackpot a player had won. Such acts of generosity often happen in the gambling world, as winners like to thank the casino staff for changing their life. Tax Court Judge Diane Campbell made it clear that the aforementioned tips should not be considered gifts.
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Direct tips are taxable under the existing law, even though the same amount was a non-taxable while it was in the hands of the jackpot winner. He was supposed to pay CA$8,411 as a negligence penalty. However, last week saw him make his way to the hearing at the Federal Court of Appeal in Vancouver. More information on the subject is expected to be issued soon.
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