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.
GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 207041
Dear [Client]
Subject: GST/HST RULING
Application of the GST/HST to online vouchers
Thank you for your letter of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to online vouchers issued by […][the Company] to its customers.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand that:
1. [The Company] is a GST/HST registrant located in Canada.
2. [The Company] has an online website where customers can purchase products.
3. An online voucher is sent by email to […] customers [of the Company] when certain conditions are met, […]
4. The online voucher has an expiration date and cannot be combined with any other offer.
5. The online voucher has a fixed amount and cannot be re-loaded with additional funds.
6. The online voucher has a monetary value. The specified amount may be applied against […][web site] purchases […].
7. […].
8. The online voucher contains a unique promo code. Customers have to type in the promo code at checkout before proceeding with the payment.
9. The online voucher is funded by [the Company] and is an offset to its sales. [The Company] is not reimbursed by its suppliers for the value of the promo code.
RULING REQUESTED
You would like to know whether the online voucher is considered a coupon, and if not, can the voucher be considered a price reduction.
RULING GIVEN
Based on the facts set out above, we rule that the online voucher is considered a coupon under subsection 181(1) and tax is to be applied in accordance with subsection 181(4).
EXPLANATION
Subsection 181(1) defines a “coupon” to include “a voucher, receipt, ticket or other device but does not include a gift certificate or a barter unit (within the meaning of section 181.3).
The Canada Revenue Agency (CRA) has taken the position that the definition of a “coupon” encompasses an intangible device that has the characteristics of a traditional paper coupon, including the presentation of the device (by way of a card or other identifiable characteristics) by the purchaser and the acceptance of the device by the retailer. An electronic coupon that is provided to a purchaser in respect of a product in replacement of a printed coupon will be treated in the same manner as the printed coupon, if the manner in which the electronic coupon is presented, accepted and treated by all parties mirrors the treatment of a printed coupon.
Under subsection 181(4), when a registrant accepts, in full or partial consideration for a supply of property or a service, a coupon that may be exchanged for the property or service or that entitles the recipient of the supply to a reduction of, or a discount on, the price of the property or service and subsection 181(2) does not apply in respect of the coupon, the value of the consideration for the supply is deemed to be the amount, if any, by which the value of the consideration for the supply exceeds the discount or exchange value of the coupon. In other words, the recipient of the supply would be required to pay tax on the net consideration for the supply; that is, after deducting the value of the coupon.
In this situation, since the non-reimbursable fixed dollar coupon can be used for the purchase of taxable and zero-rated items, subsection 181(4) applies. Accordingly, the coupon is to be pro-rated among each of the items purchased based upon the value of the consideration for each item, and as such, the coupon is accepted in part against zero-rated supplies, as well as taxable supplies. GST/HST at the applicable rate then applies on the reduced consideration attributable to each of the taxable items.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the CRA is bound by the ruling given in this letter provided that: none of the issues discussed in the ruling are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed. The interpretation given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA's interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 819 271 8708. 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,
Joseph Zeidan
Goods Unit
General Operations and Border Issues Division
GST/HST Rulings Directorate