Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
Place De Ville, Tower A, 15th Floor
320 Queen Street
Ottawa, ON
K1A 0L5
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
Case Number; 108089
Business Number: XXXXX
March 16, 2009
Subject:
GST/HST RULING ON XXXXX COUPONS
Dear XXXXX,
Thank you for your letter of XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the application of section 181 of the Excise Tax Act to cash back rebates issued by XXXXX on the sale of certain models of XXXXX.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
We understand:
• XXXXX is an equipment distributor operating in Canada. XXXXX operates in a niche market selling certain construction equipment to customers in Canada.
• As an incentive, a person can receive a cash discount of $XXXXX or $XXXXX on the purchase of XXXXX by submitting a cash back rebate coupon to a retailer which outlines the two possible discount amounts on the face of the coupon.
• The amount of the discount depends on the model of the XXXXX. Specifically, a $XXXXX cash back rebate will be provided on XXXXX.
• A $XXXXX cash back rebate will be provided on XXXXX.
• A $XXXXX cash back rebate will be provided XXXXX and a $XXXXX cash back rebate will be provided on XXXXX.
• Nowhere on the cash back rebate form provided to the customer or to the dealers does it indicate Goods and Serves Tax (GST) is included in the incentive.
• In order to activate the cash back rebate the purchaser is required to call a phone number on the coupon.
• The purchaser is then required to take the "ad" to their XXXXX dealer on or before a specific date to get cash back on their next equipment purchase.
• This discount is offered by the retailer at the time of purchase when the "cash back rebate" coupon is tendered by the customer to the retailer.
• The cash back is in the form of a discount given at the time of sale and not cash received by the purchaser.
• XXXXX receives a cash rebate from the manufacturer, XXXXX. XXXXX reimburses XXXXX two thirds of the discount to the purchaser while XXXXX absorbs the remaining one-third.
Ruling Requested
You would like to know if section 181 of the ETA, and specifically subsection 181(2) applies to the coupons issued by XXXXX.
Ruling Given
Based on the facts set out above, we rule that subsection 181(4) of the ETA applies to the XXXXX coupons outlined above.
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
Subsection 181(4) applies to "other coupons" to which paragraphs 181(2)(a) to (c) do not apply in respect of the coupons under subsection 181(4). The value of the consideration for the supply is deemed to be the amount, if any, by which the value of the consideration for the supply exceeds the discount or exchange value of the coupon.
Subsection 181(2) does not apply because this subsection applies to coupons that entitle the recipient of the supply to a reduction of the price of the property or service equal to a fixed dollar amount specified in the coupon.
The coupon in question entitles the recipient to either a $XXXXX or $XXXXX discount depending of the product that is purchased. Therefore the coupon cannot be said to be for a fixed dollar amount specified in the coupon.
We draw your attention to page 36 of the General Information Guide for GST/HST Registrants (2008) which outlines the position of the CRA in respect of this matter in the form of a soft drink example.
Other coupons
Other coupons (whether reimbursable or not) that are not for one specific monetary discount may:
• offer a different percentage off the price of an item (such as 10% off the purchase of 5 or less boxes and 20% off the purchase of 6 or more);
• offer an item for no charge if another item is purchased (such as two-for-one coupons); or
• contain more than one monetary discount such as 25¢ off a 750 ml soft drink, or 50¢ off a 1.5 litre soft drink.
These coupons reduce the selling price of an item before GST/HST is added. Therefore, deduct the value of the coupons from the selling price before calculating GST/HST.
When a registrant accepts, in full or partial consideration for a supply of property or a service, a coupon that may be exchanged for the property or service or that entitles the recipient of the supply to a reduction of, or a discount on, the price of the property or service and paragraphs 181(2)(a) to (c) do not apply, the value of the consideration for the supply is deemed to be the amount, if any, by which the value of the consideration for the supply as otherwise determined exceeds the discount or exchange value of the coupon under subsection 181(4) of the ETA.
Since the XXXXX coupon, like the cola example above, do not meet the requirements of paragraphs 181(2)(a) to (c), section 181(4) of the ETA applies.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-9220. 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,
Lawrence Springstead
Industry Sector Specialist
Specialty Tax Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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