29 July 2011 Headquarters Letter 95868

A credit card loyalty program is proposed in which participating organizations (Organizations C) assist in the marketing of credit cards of a particular credit card company (FinanceCo). By using the credit card, members of Organizations C accumulate various member rewards which they may use to purchase rewards from Organizations C. Amounts paid by FinanceCo to Organizations C fund the cost of these rewards. After ruling that the amounts received by Organizations C from FinanceCo are consideration for a single taxable supply, CRA states:

[Organizations C] activities when considered as a whole are predominantly in respect of the promotion and marketing of the Loyalty Program. Moreover, the services performed by [Organizations C] do not meet the factors that are used to determine whether a supply is arranging for a financial service under paragraph (l), such as the degree of direct involvement with the consumers or the time expended in the provision of a financial service referred to in any of paragraphs (a) to (i).

See also 3 August 2011 Headquarters Letter 137201 in respect of the same loyalty program.

A credit card loyalty program is proposed in which participating organizations (Organizations C) assist in the marketing of credit cards of a particular credit card company (FinanceCo). By using the credit card, members of Organizations C accumulate various member rewards which they may apply to purchase rewards from Organizations C. Amounts paid by FinanceCo to Organizations C fund the cost of these rewards.

CRA rules that Organizations C's supplies to members using their credits are made for consideration equal to the purchase price charged for the supplied items before deduction of the amount of the applied credits; i.e., the credits are part of the consideration for the supply to the members.