23 June 2000 GST/HST Interpretation 30627 - Confirmation of Redemption of Coupons in Electronic Format for Goods and Services

XXXXX

Thank you for your letter of March 23, 2000 concerning whether electronic data used to keep track of points that can be redeemed for goods and services will be considered to be a coupon for purposes of the Excise Tax Act ("the ETA").

We understand from the information provided in your letter and our telephone conversation of April 27, 2000, that it is your view that where a customer earns points based on the amount of goods and services purchased, and these points may then be used to redeem merchandise or cash, the points should be considered a coupon for GST/HST purposes. You stated that as there is no consideration for the electronic coupon (the points), it would not be a gift certificate as defined in policy statement P-202. The electronic recording of the points available to be redeemed for goods or services should not preclude it from being a coupon, and this position is supported by Question & Answer GST#6a.413, in which it is stated that electronic discounts are coupons for GST/HST purposes. XXXXX[.]

Interpretation Requested

You request confirmation that points earned under a rewards program where points can be redeemed for goods and services and that are received for no consideration are coupons for GST/HST purposes.

Interpretation Given

Subsection 181(1) of the ETA defines "coupon" to include "a voucher, receipt, ticket or other device but does not include a gift certificate". As consideration is not paid for the points, they generally would not be gift certificates pursuant to policy statement P-202. However, the Canada Customs and Revenue Agency has taken the position that the definition of "coupon" encompasses intangible devices that have the characteristics of a traditional coupon. While each point may in fact have no value, a point rewarded under a rewards program will nonetheless generally meet the definition of "coupon" for GST/HST purposes.

Further, as we discussed during our telephone conversation, that generally while "a point" is a coupon, it usually does not entitle the recipient to a reduction in the consideration for the supply of the property/service equal to a fixed dollar or fixed percentage specified in the coupon (i.e. specified in the "point"); rather the points have no value until they attain stated thresholds, at which time the customer would then be entitled to a reduction. Generally, subsection 181(4) of the ETA applies to both reimbursable and non-reimbursable coupons that do not provide the recipient with a fixed dollar or fixed percentage reduction in the consideration for the property or service, or that do not meet all the requirements of subsections 181(2) or (3) of the ETA. Pursuant to subsection 181(4) of the ETA the consideration for the property or service is reduced by the coupon amount before GST/HST is applied. Therefore, subsection 181(4) of the ETA will apply where points are accumulated and redeemed after certain thresholds are met. However, it is always a question of fact as to how any particular provision in the ETA will apply to the accumulation and redemption of points under a rewards program.

We would also like to advise you that the treatment of coupons, including points earned under a rewards program, and gift certificates for GST/HST purposes is currently under review by our division.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 952-9213.

Yours truly,

Susan Kissner
Corporate Reorganizations Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate