Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 141283
April 23, 2013
Dear [Client]:
Subject: GST/HST RULING
Application of the GST/HST to gift vouchers
Thank you for your letter of December 13, 2011, concerning the application of the goods and services tax (GST)/harmonized sales tax (HST) to vouchers sold to Canadian employers who in turn gift these vouchers to their employees. We apologize for the delay in our response.
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island (effective April 1, 2013) and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
[...] ([...][USco]) is a US-based company that is considering expanding into Canada. USco sells vouchers [...] to employers who in turn give them to their employees as holiday gifts. The employees use the vouchers to get free or substantially discounted [...] [products]. USco sells the vouchers to the employers for [...] [the price].
The vouchers have the words "gift certificate" printed on the front of them and entitle the bearer to receive, without charge, a product with a monetary value up to a stated dollar maximum [...]. Where the value of the product exceeds the dollar limit of the voucher, the bearer will pay the difference. The bearer is responsible for any applicable taxes.
Upon redemption of a voucher from a retailer, USco reimburses the retailer for the price of the product up to the dollar limit of the voucher. It also pays the retailer [...]. The retailer submits the voucher to USco through its usual coupon redemption process. If the price of the product is less than the dollar limit of the voucher, USco will retain the difference as additional revenue. USco intends to use a Canadian-based coupon clearing house to facilitate the redemption process.
USco does not have any contracts with retailers in the United States, and it does not intend to enter into contracts with retailers in Canada. Rather, its vouchers are accepted and redeemed through the normal coupon redemption process.
USco does not plan on having any agents located in Canada, does not solicit any business from Canada, and does not intend to have a branch or office in Canada. However, USco intends to hold a Canadian bank account and use a Canadian-based coupon clearing house to facilitate the redemption process.
Ruling Requested
You would like to know if the GST/HST will apply to the sale of these vouchers to Canadian purchasers for use in Canada.
Ruling Given
Based on the facts set out above, we rule that the vouchers sold by USco will be treated as coupons for GST/HST purposes. USco is not required to collect and remit the GST/HST on sales of these coupons to Canadian purchasers provided it is not carrying on business in Canada and is not registered for the GST/HST.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
Gift Certificate vs. Coupon:
Gift certificates and coupons are treated differently for GST/HST purposes. The definition of "coupon" includes a voucher, receipt, ticket or other device but does not include a gift certificate or a barter unit.
The term gift certificate is not defined in the ETA. Generally, the CRA considers several criteria in determining whether a particular device is a gift certificate. A gift certificate is a device (e.g. voucher, receipt, ticket):
• that usually has a monetary value or is for a supply of property or service,
• that can be redeemed on the purchase of property or a service from a particular supplier; i.e. the supplier agrees to accept the device as consideration, or a part thereof, towards the purchase of property or a service,
• for which consideration was given, and
• that has no intrinsic value.
Based on a review of the sample vouchers you provided and the samples shown on USco's Web site, it is our view that the vouchers are coupons for GST/HST purposes.
USco is not required to collect and remit the GST/HST on sales of coupons to Canadian purchasers provided it is not carrying on business in Canada and is not registered for the GST/HST. Detailed information regarding the application of the GST/HST to non-residents, including the issue of carrying on business in Canada, is provided in GST/HST Guide RC4027, Doing Business in Canada - GST/HST Information for Non-residents, which can be accessed at the following link: www.cra-arc.gc.ca/E/pub/gp/rc4027/README.html and GST/HST Policy Statement P-051R2, Carrying on Business in Canada, which can be accessed at the following link: www.cra-arc.gc.ca/E/pub/gl/p-051r2/p-051r2-e.pdf. [...].
For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.
If you require further clarification with respect to the characterization of the vouchers as coupons, please call me directly at 905-721-5083. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Siraj Patel, CGA
Financial Institutions and Real Property Division
Legislative Policy and Regulatory Affairs Branch Division
Excise and GST/HST Rulings Directorate
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