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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 137872
October 21, 2011
Dear [Client]:
Subject:
GST/HST INTERPRETATION
[Purchases made with] On-line vouchers
Thank you for your [...] query of August 4th and 5th, 2011, concerning the application of HST on purchases made with on-line vouchers.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
From your telephone conversations we understand the following:
• You purchased an on-line voucher for a [...] deal for the promotional price of $138.00 for a [...] deal regularly valued at a higher amount (the amount of $200 was discussed for purposes of the example).
• The voucher was redeemed at a [...] retailer for a [...] deal.
• In addition to the [...] deal, [...] were purchased and paid in cash - $27.00
• The tax charged was $29.51 (13% x $227.00)
• The voucher states that tax [...] will be based on the regular price of the [...].
• You feel that the amount of tax that should have been paid at the time of redemption is; $21.45 ([$138.00 + $27.00] x 13%)
Interpretation Requested
In addition to receiving general information on the treatment of on-line vouchers, you would like to know the correct amount of tax to be charged on the voucher redemption described above.
Interpretation Given
The GST/HST treatment of on-line vouchers depends on the terms of the particular agreement between the parties and whether the voucher is a coupon or a gift certificate. Due to the wide variety of vouchers available for purchase, we are unable to provide a determination of the amount of tax to be charged on the voucher redemption described previously without the necessary documentation. However, we are pleased to provide you with the following information about coupons and gift certificates to assist you in understanding the application of the GST/HST to on-line vouchers.
The term "gift certificate" is not defined in the ETA. Generally, the Canada Revenue Agency considers the following 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.
Section 181.2 provides that, for GST/HST purposes, the issuance or sale of a gift certificate for consideration is deemed not to be a supply and, when given as consideration for a supply of property or a service, the gift certificate is deemed to be money.
No GST/HST should be charged to customers on the issuance or sale of vouchers that are considered to be gift certificates; however, the GST/HST registrant merchant who accepts the voucher is required to account for the GST/HST payable by the recipient on the value of the consideration charged in respect of the taxable (other than zero-rated) supply of the goods or services. At the time of redemption, the voucher is treated as money that is given as full or partial payment towards the purchase of the goods or services.
Merchants that intend to supply the goods and services otherwise valued at the regular price for the promotional price paid for the voucher should determine the value of the consideration upon which GST/HST must be accounted by referring to the promotional price.
The definition of coupon includes a voucher, receipt, ticket or other device but does not include a gift certificate or a barter unit. A coupon generally reduces the price for a supply of property or service and section 181 describes the tax treatment of three types of coupons: reimbursable, non-reimbursable and other coupons.
Where a company issues a voucher that is a coupon to a consumer for no consideration on behalf of a merchant who agrees to honour the coupon at its establishment, the company would not be required to account for tax on the supply of the coupon to the consumer since no consideration is charged for the supply of the coupon. Where the company charges consideration for the supply of the coupon to the consumer it would be required to account for tax on the value of that consideration. On the redemption of the coupon, the merchant redeeming the coupon would be required to account for tax on the good or service supplied either on the full value of the consideration for the good or service or on the reduced consideration, depending on the type of coupon.
For more information, please refer to the section entitled "Coupons, rebates, gifts and promotional allowances" in the GST/HST Guide, General Information for GST/HST Registrants.
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 (902) 426-6940. 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,
Nancy Jardine
Specialty Tax Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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