23 February 2006 GST/HST Interpretation 61456 - GST/HST Info Sheet on ABM Services: Interchange

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.

Dear XXXXX:

Thank you for your letter XXXXX, with attachments, requesting CRA to reconsider our position regarding the reimbursements for Complimentaries provided at XXXXX as provided in our correspondence XXXXX. You have also provided further documentation for our examination.

Statement of Facts

Our understanding of the facts is as follows:

In our previous GST ruling XXXXX we provided three conclusions with respect to XXXXX operating services, complimentary vouchers accepted as coupons, and amounts paid to the XXXXX. You indicate that you agree with the CRA regarding our conclusion provided on the XXXXX operating services, however you are not in agreement with our second and third conclusions.

Those rulings were:

The complimentary voucher accepted by the XXXXX is a coupon as per subsection 181(1) of the ETA. When the coupon is accepted by the XXXXX as full or partial consideration for a taxable supply, the provisions of subsection 181(3) of the ETA apply.

When the XXXXX invoices XXXXX for its costs in providing the goods and services supplied to the patrons, the provisions of subsection 181(5) of the ETA do not apply to the amounts paid by XXXXX. The amounts paid to the XXXXX are not for the redemption of coupons.

Your position is as follows:

When the XXXXX voucher is accepted by the XXXXX as full or partial consideration for a taxable supply, the XXXXX is reimbursed for the acceptance of the voucher by XXXXX. Consequently, it is your view that the provisions of subsection 181(2) of the ETA should apply rather than subsection 181(3) of the ETA. When the XXXXX invoices XXXXX the amount paid to the XXXXX by XXXXX is for the redemption of the XXXXX Coupon. Consequently, it is your view that the provisions of subsection 181(5) of the ETA should apply.

You provided us with an undated Letter of Understanding between a XXXXX that discusses a formula for payments to be made to the XXXXX in exchange for accepting the coupons. Whether these payments are indeed payments for the reimbursement of coupons or payments for another supply is the question at hand.

The sample documentation received indicates that the XXXXX invoices XXXXX for a supply of food and other expenses. The amounts although not verified may be based upon the formulae in the Letter of Understanding. There is no identified amount on the XXXXX sample invoices in respect of GST charged.

Our understanding of the facts, the transactions, and the purpose of the transactions are as follows:

1. XXXXX has entered into agreements (XXXXX Agreements) with XXXXX, generally XXXXX, for the purpose of placing XXXXX. A clause common to all agreements appoints the XXXXX to provide premises and related services to XXXXX for XXXXX conduct, management and operation of XXXXX.

The following XXXXX agreement reflects the agreement on complimentaries between a XXXXX and XXXXX:

XXXXX.

2. XXXXX.

3. A XXXXX patron can earn notional dollars that can be exchanged for complimentaries (e.g., a meal, parking or gift shop items); these are called discretionary complimentaries.

4. The following are key concepts with respect to discretionary complimentaries:

•   Patrons earn discretionary complimentary Canadian dollars based on XXXXX.

•   XXXXX.

•   Only notional Canadian dollar amounts are accumulated based on information from the XXXXX information system in the discretionary account.

•   Only Canadian dollar amounts reduce the discretionary account.

5. The following are key policies and information related to discretionary complimentaries:

•   Complimentary vouchers are issued at the discretion of XXXXX employees.

•   Complimentary vouchers must be used within XXXXX days.

•   The unused portion will not be refunded (e.g., meal voucher $10, cost of meal $8.50, reduction in discretionary account $10 and a cash refund is not provided to the patron).

•   Complimentary vouchers can be issued to a patron for use at a particular XXXXX facility irrespective of which location the patron earned the discretionary dollar amounts.

•   Complimentary vouchers are not issued for "free" goods or services. The complimentary vouchers are issued with a stated notional monetary value.

•   Complimentary vouchers are not accepted for zero-rated or exempt supplies and are not accepted towards the purchase of alcoholic beverages or tobacco products.

6. A voucher is issued to the patron by XXXXX. The voucher is valid once the patron and the proper XXXXX representative sign it.

7. The XXXXX prepares and serves a meal in its restaurant and presents a bill to the patron who ordered the meal and who pays the XXXXX for the meal. Where the patron presents the voucher to the XXXXX, the XXXXX treats the voucher provided to the patron by XXXXX as all or part of the amount payable for the patron's meal. The restaurant bill refers to the voucher as an "XXXXX voucher".

8. Pursuant to the XXXXX Agreements, XXXXX is required to pay the XXXXX and amount less than the retail value of the supply.

Rulings Requested

1. The complimentary voucher accepted by the XXXXX as full or partial consideration for a taxable supply is a coupon as per subsection 181(1) of the Excise Tax Act (ETA). When the XXXXX accepts the coupon the provisions of subsection 181(2) of the ETA apply.

2. When the XXXXX invoices XXXXX for its costs in providing the goods and services to the patrons, the provisions of subsection 181(5) of the ETA apply to the amounts paid by XXXXX to the XXXXX. The amounts paid by XXXXX to the XXXXX are for the redemption of coupons.

Rulings Given

We have reviewed the treatment afforded the vouchers provided to consumers and provide the following rulings, which: replace and supersede our previous ruling letter XXXXX to you XXXXX in all aspects except for Ruling Given No. 1 ^[xxv]1.

•   The vouchers are not coupons for purposes of section 181 of the ETA.

•   Depending on the fact situation, when a XXXXX accepts an XXXXX voucher from a consumer in respect of a supply of a meal the XXXXX is making a supply to XXXXX for which it subsequently invoices XXXXX an amount.

•   Also depending on the facts, the XXXXX may also be making a supply to the consumer in situations where the consumer is required to pay an additional amount in excess of the value of the voucher. It is our view that the consideration payable by XXXXX to the XXXXX is in respect of a supply of meals made to XXXXX and is subject to the GST at 7%.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 613-952-9219.

Yours truly,

Ken Syer
Manager
Specialty Tax Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate

2006/03/30 — RITS 62164 — Cemetery Property and/or Services Under a Pre-need Arrangement