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
Attention: XXXXX
Case Number: 113428
June 7, 2010
Dear XXXXX:
Subject:
GST/HST RULING
Treatment of XXXXX-issued employee voucher
Thank you for your XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to a transaction involving a XXXXX-issued "Employee Voucher Coupon" accepted in exchange for the supply of a XXXXX without charge.
HST currently applies at the rate of 13% in Nova Scotia, New Brunswick, and Newfoundland and Labrador. Effective July 1, 2010, HST will apply at the rate of 15% in Nova Scotia, 13% in New Brunswick, Newfoundland and Labrador, and Ontario, and 12% in British Columbia. GST will continue to apply at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
We understand the following:
1. XXXXX issued an "Employee Voucher Coupon" ("the Voucher") that may be exchanged by the XXXXX employee as full consideration for a supply of one XXXXX. At the time of issue, the Voucher is signed by an authorized representative of the XXXXX. There is an expiry date on the Voucher, but there is no fixed dollar amount stated. It can be redeemed only for XXXXX brands of the XXXXX from XXXXX ("the store").
2. The employee who wants to redeem the Voucher ticks off the brand he wants to acquire, signs and surrenders the Voucher to the store and receives the selected XXXXX.
3. The employee arrived at XXXXX where there is XXXXX of the store and surrendered the Voucher as full consideration for his XXXXX.
4. At the time of the sale of XXXXX to the employee using the Voucher, the store records the full sale price, including GST/HST, which is offset with a receivable to the store from the XXXXX.
5. Each week the corporate office of the store compiles the Vouchers from its XXXXX for reimbursement of product from the XXXXX.
Ruling Requested
You would like to know
1. Is the Employee Voucher Coupon ("the Voucher") a coupon?
2. If the Voucher is a coupon for purposes of section 181, what type of coupon is it and what provisions apply?
3. Is an input tax credit ("ITC") available with respect to the Voucher?
Ruling Given
Based on the facts set out above, we rule that
1. The Employee Voucher Coupon ("the Voucher") is a coupon for purposes of section 181.
2. Although the store is reimbursed by the XXXXX for accepting the Voucher as a coupon in exchange as full consideration of a supply of a XXXXX, the coupon is not considered to be a reimbursable coupon to which subsection 181(2) applies as there is no fixed dollar amount specified in the Voucher; instead, subsection 181(4) applies to the Voucher.
Under subsection 181(4), the Voucher is exchanged for a XXXXX, the value of the consideration for the supply of the XXXXX is reduced before the calculation of any GST/HST. Since the Voucher is exchanged as full consideration for the XXXXX, GST/HST would be calculated on the value remaining that is nil. Therefore, the store does not charge and account for the HST in respect of the supply of the XXXXX provided to the employee in exchange for the Voucher.
3. No ITC in respect of the Voucher is available.
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
The Voucher permits the bearer, the XXXXX employee, to exchange the Voucher for a XXXXX. The Voucher is considered to be a "coupon" as the term is defined and interpreted for purposes of section 181. However, as the coupon (i.e. the Voucher) has no fixed dollar amount specified in the coupon, the Voucher is not a reimbursable coupon as outlined in subsection 181(2). Regardless of the fact that the Voucher is reimbursable to the store, the Voucher does not have a stated fixed dollar value; as a result, subsection 181(4) applies to the Voucher.
When the Voucher is reimbursed with product from the XXXXX, we view two simultaneous transactions to occur. One transaction is the reimbursement of the Voucher to the store by the XXXXX for the value of the product and the other transaction is the sale of the replacement product to the store for the amount reimbursed for the Voucher. Under paragraphs 181(5)(a) and 181(5)(b), the amount reimbursed in the first transaction by the XXXXX is deemed not to be consideration for a supply and the payment by the XXXXX and receipt by the store of the amount is deemed not to be a financial service. Effectively, the XXXXX has now paid an amount to the store for the earlier supply of XXXXX to the employee and not for a separate supply of the Voucher. Then that amount is used in the second transaction as consideration for the supply of the replacement product received by the store from the XXXXX.
The store is entitled to claim an ITC in accordance with the rules of section 169 with respect to its purchases of XXXXX, including the replacement product received, to the extent the XXXXX is acquired for supply in the course of the store's commercial activities. However, no ITC is available with respect to the Voucher as the Voucher, although a coupon, is not a reimbursable coupon under subsection 181(2) and, therefore, paragraph 181(5)(c) does not apply such that an ITC in respect of the Voucher may be claimed.
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
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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