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.
XXXXX
XXXXX
XXXXX
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 105318
May 27, 2010
Dear XXXXX:
Subject:
GST/HST INTERPRETATION
Reward points
Thank you for your letter of XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to transactions involving reward points issued by your client, XXXXX.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
We understand XXXXX as follows:
1. Established in XXXXX, XXXXX is a business-to-business online trading exchange with its head office in XXXXX, Canada. Effective XXXXX, XXXXX was designated as administrator of its barter exchange network under section 181.3.
2. Businesses and individuals become XXXXX members ("Members") by applying online. XXXXX operates a XXXXX (i.e. XXXXX barter exchange network) where Members may exchange their supplies of property or services for supplies of property or services of other Members.
3. Members agree to purchase or sell supplies through the XXXXX using currency units known as "XXXXX" (barter value $XXXXX per unit). Members acquire XXXXX by selling their supplies and accepting XXXXX in payment.
4. In addition to its XXXXX, XXXXX proposes to offer its Members points through voluntary participation in the Reward Points Program as rewards to Members who complete surveys or refer new Members. Points would be issued separately and outside of XXXXX. Points would be different from XXXXX in the way they would be acquired by Members, and also in the fact that points would only be exchanged for specific property or services listed periodically, whereas XXXXX can be used any time to obtain any property or services offered by Members online. Members would have online access to their statements to see how many points they have. Currently the nature of the property or services that would be available has not been fully determined. Certain property or services would be supplied outside Canada, such as emergency supplies acquired and donated to charities to support their foreign initiatives. Members would be able to login to their secure site and order an exchange of points for property or services they select.
5. The following information was provided by telephone during a conversation with Bao Tran of this office on XXXXX:
(a) XXXXX.
(b) There would be no obligation to redeem points. Redemption of points would occur periodically, generally XXXXX to XXXXX times a year, but may be less often. A Member could redeem points for available property or services only at the time of redemption. XXXXX.
6. Points would have an exchange value only-they could only be used to acquire specified property or services. The Member may then sell the property or services for a certain value of XXXXX. However, points would not be directly exchanged for XXXXX.
Interpretation Requested
You would like to know whether:
1. The issuance of points as rewards described above for completing surveys, referring new Members, etc would be subject to GST/HST.
2. GST/HST would apply when the points are redeemed for supplies of property or services made in or outside Canada.
3. The points would qualify as coupons under subsection 181(4) when the points are redeemed for taxable supplies of property or services in Canada.
Interpretation Given
As some information such as the terms and conditions between XXXXX and its Members are not available, we are providing the following interpretation.
Based on the information provided:
1. The issuance of points as rewards described above for completing surveys, referring new Members, etc would not be subject to GST/HST. The issuance of points would be the supply of rights-intangible personal property ("IPP")-that may be exchanged for available property or services at the time of redemption. However, the XXXXX points are issued as a reward and have no intrinsic value.
2. GST/HST would not apply when the points are redeemed for supplies of property or services made in or outside Canada as the points have no intrinsic value.
3. When a Member redeems their points for taxable supplies of property or services in Canada, there would be no GST/HST consequences with respect to the redemption of the points in relation to the particular supply; however, GST/HST would be applicable on the amount of any consideration that is payable in excess of the exchange value of the points. The Canada Revenue Agency generally accepts that the redemption of points for property or services is afforded the same treatment as the redemption of a coupon as the term is contemplated in subsection 181(1). Accordingly, when the points are redeemed, they would be treated as a coupon under subsection 181(4) in this case.
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 613-952-8811. 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,
William Parker
Specialty Tax Unit
Financial Institutions and Real Property Division
UNCLASSIFIED
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