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Huong Trang Fish Market owners Trieu Tran, right, and her husband Yao Xue accept only cash. Going cardless saves the couple high service fees and simplifies their day-to-day bookkeeping.

Globe and Mail

On a busy day at Huong Trang Fish Market – a stall within the indoor, year-round Hamilton Farmers’ Market – owners Trieu Tran and Yao Xue don’t get much downtime. Ms. Tran often handles the transactions while Mr. Xue cleans the fish, an efficient system the couple have refined over years working together. They say the main reason they only take cash is because they don’t like making customers wait very long.

“If we had a machine, people would be pressing buttons, pulling out their card and taking too much time,” said Ms. Tran recently. "There are customers who don’t want to buy anything if we don’t accept debit and credit, but the majority of customers go use the ATMs and come back.”

At a time when it’s easy to go weeks without touching money, Huong Trang is among the small number of cash-only holdouts in Canada. Citing speed of service, ease of accounting and avoiding fees associated with accepting cards, these businesses say cash still works best for their operations, despite constant pressures to accept plastic.

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“We’ve been thinking about [accepting debit for] the past three years, but it hasn’t happened yet,” said Ms. Tran, noting debit’s comparatively low fees make it more attractive than credit. “Business is fine without it.”

It’s hard to know how many cash-only businesses are left in Canada but, by all accounts, their numbers are dwindling. A 2011 survey by the Canadian Federation of Independent Business (CFIB) found that 95 per cent of businesses in the retail and hospitality sector accepted credit cards and 93 per cent took debit. The organization plans to release updated numbers later this year.

Henry Ibbotson, his mom Bethany Foster, centre, and dad Russell consider their choices at Huong Trang Fish Market in Hamilton’s Farmer’s Market. Ms. Tran says they come across customers who don’t want to buy anything if they don’t accept debit and credit, but a majority of customers go use ATMs and return for their purchase.

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CFIB president Dan Kelly says Canadian merchants typically pay between 1.5 and 3.5 per cent of sales to accept credit cards, including renting the hardware and paying processing and bank fees. The organization has negotiated a debit program with Chase Merchant Services that works out to about 5 cents per transaction, although there is an extra fee ranging from 2 to 3.5 cents for payments made using tap-to-pay technology, a “contactless” method of payment using cards or smartphones.

Interestingly, Mr. Kelly says most merchants are supportive of that fee because it paid for the expansion of Interac tap debit cards in Canada, helping them compete with credit cards. Tap cards speed up the process of taking credit or debit considerably and in that sense are comparable with cash, says Mr. Kelly, although they are prone to occasional errors that can slow down the payment process.

Cash also comes with other downsides. “It’s a fallacy to believe that cash is cost-free," says Mr. Kelly. "You pay fees to the bank when you deposit cash. You’re at much greater risk of fraud, employee theft, robbery and mistakes in giving change to customers …. If all of your transactions are electronic, your bookkeeping is a lot simpler.”

Workers at Toronto’s Cherry Bomb Coffee say they prefer cash for its speed, but also for its simplicity. The shop in the city’s west end has an antique cash register, no computer, and on some mornings, a lineup out the door. Manager Courtney Wareham says a transaction takes between five and 10 seconds, and the count at the end of the day takes a few minutes.

She says the shop has been cash-only for its 13-year existence and there is strong resistance to change among the staff. Further, “some of the staff thinks tips are more generous with cash-only,” Ms. Wareham said.

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“We have the odd customer who complains, but the laundromat next door offers an ATM and most customers run over there for cash if they need it.”

Toronto ice cream shop The Lansdowne Cone also chose to stick to cash – until recently. Loyal customers knew they needed to bring cash, but the loss of walk-in traffic was significant. “There was exasperation, even to have to cross the road” to go to the bank, said owner Denise Soueidan-O’Leary. “I never have cash on me ... I understood.”

Ms. Soueidan-O’Leary bought the seasonal business in 2015 and runs it as a social enterprise training young people with disabilities. Avoiding the complication of a debit-and-credit machine was part of her plan for simplicity, but also a cost-saving measure. Since then, she says, “the companies that provide support for debit and credit transactions have gotten smart. They made it affordable.”

When she learned she could now rent a terminal by the month, instead of for a year, she buckled, adding debit and credit midway through last season – and her monthly sales increased by 20 per cent immediately. She says the terminal costs $20 per month, debit transactions are free, and credit transactions cost about 2.8 per cent of the sale value. Card-processor Moneris deposits her sales directly into her bank account daily, meaning fewer trips to the bank and less cash on hand.

“I’d be walking around with a couple thousand dollars of cash in my pocket.”

Another downside for businesses in cash-focused industries can be increased scrutiny from the Canada Revenue Agency. CRA spokesperson Etienne Biram told The Globe and Mail that while the agency does not “capture data that distinguishes a cash-only business from any other business,” it has special compliance programs that focus on industries where the “underground economy” is known to flourish.

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Ottawa tax lawyer Vern Krishna says that includes construction, hospitality and casinos. “When they are auditing those industries, their audit procedures will ... scrutinize more carefully. They would look at your lifestyle. Where you live, how you live, what you own.”

In the five years between April 1, 2013, and March 31, 2018, Canadian courts made 113 “businesses-related” tax evasion convictions, according to the CRA. Of those, 80 were related to a T2 corporate tax return, and 33 involved GST returns.

While those numbers may sound low, Mr. Kelly says “there’s no question that there are some businesses that are cash-only because they want to be in the underground economy, but the vast majority want to do everything right.”

Mr. Krishna, who teaches common law at the University of Ottawa and acts as counsel at Toronto law firm TaxChambers, says the CRA tends to focus its investigative work on cases in which it can get the best return.

“Very few businesses or industries are left that are cash-only,” he added. “As society has changed … the one constant has been that cash is the most favoured form of transactions for tax evasion.”

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