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
Attention: XXXXX
Case Number: 110373
July 27, 2009
Subject:
GST/HST INTERPRETATION
Purchase and sale of discounted gift cards
Dear Sirs:
Thank you for your XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the purchase and sale of discounted gift cards.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Our understanding of the scenario is as follows:
1. A restaurant sells a bulk number of gift cards to a retailer. The gift cards have a value expressed in monetary terms, which is $XXXXX, printed on the face of the card. The gift cards are redeemable at the restaurant only. The use is limited to future purchases from the restaurant. There are no other conditions to the use of the card.
2. The restaurant supplies the cards for less than their face value.
3. The retailer sells the gift cards to the public for a price that is also less than their face value.
4. The customer visits the restaurant, purchases a meal, and uses the gift card as a payment towards the cost of the meal.
Interpretation Requested
1. When the restaurant sells the gift card, is it a transaction that is considered a taxable supply made to the retailer?
2. When the retailer sells the gift card to the public, is the transaction considered a taxable supply?
3. How does the restaurant treat the gift card when it is offered as payment for the meal? Is HST charged on the full price of the meal? Or is the face value of the gift card deducted from the price of the meal and HST then collected?
Interpretation Given
Based on the information provided,
1. The transaction is deemed not to be a supply for purposes of GST/HST. No GST/HST is charged.
2. When the retailer sells the gift card to the public, the transaction is also deemed not to be a supply. No GST/HST is charged.
3. When given as consideration for a supply at the restaurant, the gift card is considered to be money. GST/HST applies on the full value of the supply of the meal.
Explanation
Since you have not provided us with a sample, the following explanation outlines the treatment of gift certificates under the ETA.
The "gift card" must come within the meaning of the term "gift certificate" as described in GST/HST Policy Statement P-202, Gift Certificates: it has a stated monetary value; it can be redeemed for the purchase of property or a service from a particular supplier; consideration has been given for it; and it has no intrinsic value.
Where a gift certificate is sold for an amount less than its face value, it is still considered to be a gift certificate for purposes of section 181.2. Therefore, when the restaurant sells a gift certificate to the retailer and the retailer sells the gift certificate to a consumer, the transaction is considered not to be a supply for GST/HST purposes. GST/HST does not apply.
When a gift certificate is given as consideration by the consumer, it is treated as money. The supplier applies the GST/HST on the full value of the supply being made, and then the value of the gift certificate is applied against this total.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-957-1175. 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,
Dwight Kostjuk
Specialty Tax Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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