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Tax Free Canadian Gambling Thriving but Staff Have to Pay their Dues

Recently released figures show the gaming industry contributed $20 billion to the Canadian economy in 2019 and that is a figure that is expected to grow in 2020.

Officially amongst the top-10 of the world’s most powerful economies, the Canadian gambling industry is also amongst the top ten in its field, a list which is headed by China, the USA, Japan and Korea.

And big money means everyone wants a slice of the action, including the Canada Revenue Agency who received a favourable decision by a Canadian Federal Court of Appeals (FCA) judge who upheld a previous decision stating casino worker’s tips (namely slot machine attendants) are taxable.

Cheng Xia, a slot attendant at the Grand Villa Casino in Burnaby, B.C. was centre point in the ruling as he contested why his tips (which doubled his salary) were being taxed. Indeed the Income Tax Act defines a taxpayer’s income from an office or employment as the salary plus ‘other remuneration, including gratuities.’ However he argued his tips represented gifts which were not taxable.

Tax Court Judge Diane Campbell ruled against Xia in 2018 stating “tips are not gifts”.  “To the casino patron who wins a jackpot, his or her winnings will not be taxable. However, when part of those winnings are paid over to an employee of a casino as a thank you or in appreciation of the services the patron receives, the nature of that amount changes from being non-taxable to a taxable amount in the hands of the employee,” the judge said in her ruling.

The results of a subsequent appeal where it was implied Canadian casino players winnings are tax free and therefore should also be deemed a ‘tax free gift’.  “The fact it is income once in the hands of Xia was what mattered,” said Justice Yves de Montigny in his ruling.  

“Even if gambling winnings are generally not taxable in the hands of a casino patron, a tip or gratuity given by that same casino patron to a casino employee is not a gift and is taxable income,” his ruling stated. 

Naturally the matter of tipping is of no concern to online Canadian casino players who are not urged or feel compelled to tip when winning a jackpot slot prize online. It’s one of many advantages of playing online slots. Other benefits include no delay in wins being verified or paid and no concerns in leaving a brick and mortar casino with a bundle of cash in your pocket which could be dangerous.