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, 5th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 210068r
Dear [Client]:
Subject: GST/HST RULING
Whether gift cards are gift certificates
Thank you for your letter of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to certain gift cards and if they qualify under section 181.2 as gift certificates. We apologize for the delay in responding.
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 the facts as follows:
1. […][The company] is a Canadian resident corporation and a GST/HST registrant. The company […][sells] gift cards to its customers […] either in person […] or online from the company’s website.
2. The company purchases the gift cards either directly from the issuers, […] or indirectly from a third party wholesaler on the company’s own account for resale to customers. There is no consignment, agency or other relationship between the company and the Issuers or wholesalers, as the case may be.
3. To acquire a gift card, a customer will pay a fixed retail listed price to the company. The gift card may be purchased in a physical form or be retrievable electronically as a digital gift card.
4. The gift cards can be described in these categories:
a. Gift Card A: a gift card with a stated cash value that can be used for online purchases of digital or hardcopy software, in-game content or other intangible personal property, services, hardware or accessories. […].
b. Gift Card B: a gift card with a stated cash value that can be used for an online time-limited subscription to use software or to access specific software or hardware features, such as a season pass to a video game or a three to twelve-month membership enabling a gaming console user to access online software features through their gaming console.[…].
c. Gift Card C: a gift card without a stated cash value that can be used for an online time-limited subscription to use software or to access specific software or hardware features, such as a season pass to a video game, downloadable content or a three to twelve-month membership enabling access for a gaming console. […].
d. Gift Card D: a gift card without a stated cash value that provides a digital code to download a digital copy of a specific video game. […].
e. Gift Card E: a gift card with stated points or cash value that can be used for online in-game purchases of a variety of in-game content limited to a specific game. […].
5. The purchase and use of a gift card by a customer is subject to the particular card’s terms and conditions: […]
a. Gift Card A: […][To use Gift Card A, the customer must have the appropriate account with the card issuer. Gift Card A has] […] neither an expiration date nor a service fee […][The value of Gift Card A] is redeemed to […][the applicable customer account with the issuer, for use by the customer for full or partial payment of future online purchases] Customers can purchase products such as software licences, subscriptions, other related content and potentially hardware […][online].
b. Gift Card B: […][To use Gift Card B, the customer must have the appropriate account with the card issuer. Gift Card B][…] has neither an expiration date nor a service fee. […][The value of Gift Card B] is redeemable on […][the applicable customer] account, giving the customer the right to access the digital content for the set time period.
c. Gift Card C: […][To use Gift Card C, the customer must have an account with the card issuer. Gift Card C has] neither an expiration date nor a service fee […][and the value of Gift Card C] is redeemable on the applicable account, giving the customer the right to access the digital content for the set time period.
d. Gift Card D: […][To use Gift Card D, the customer must have the appropriate account with the card issuer. Gift Card D has] neither an expiration date nor a service fee […][and the value of Gift Card C] is redeemable on the applicable account, giving the customer the right to download and use the specified game.
e. Gift Card E: […][To use Gift Card E, the customer must have the appropriate account with the card issuer. Gift Card E has] neither an expiration date nor a service fee […],. When redeemed, the full value […][of Gift Card E is added to the applicable customer account] from which in-game content such as customization options and exclusive downloadable content can be obtained.
6. […]
RULINGS REQUESTED
You would like to know the following:
1. Whether a gift card is required to be in a physical form or can it be in an electronic/digital format (e.g., a digital code) to qualify as a gift certificate under section 181.2.
2. As a result of the […][Canadian Imperial Bank of Commerce v Canada, 2021 FCA 96 (the FCA Aeroplan Decision)], must a gift card have a stated monetary value on its face to qualify as a gift certificate?
a. Will the CRA continue to accept that a stated monetary value is not required where it can be easily determined by the parties involved in the transaction or where the gift certificate is for a specific product or service as per […][GST/HST Policy Statement P 202, Gift Certificates (P 202)]?
b. Does the retail list price for the specific product or service qualify as the “stated monetary value” or, alternatively, is the list price a way the parties to the transaction can easily determine that value as per P-202?
3. As a result of the FCA Aeroplan Decision, is a gift card that entitles a person to redeem it for a particular or specific product or service still considered a gift certificate?
4. Does a gift card that is redeemable for a time-limited (e.g., 30 or 60 days, 3, 6 or 12 months) subscription service qualify as a gift certificate?
5. Do each of Gift Cards A to Gift Cards E qualify as a gift certificate?
RULINGS GIVEN
Based on the facts set out above, we rule that:
1. A gift card can be in a physical form or in an electronic/digital format (e.g., a digital code) to qualify as a gift certificate under section 181.2.
2. The CRA has no intention at this time of changing P-202; neither […][the Canadian Imperial Bank of Commerce v Her Majesty the Queen, 2019 TCC 79,] the Aeroplan Decision, nor the FCA Aeroplan Decision affect the CRA’s current policy. The attributes of a gift certificate as stated in P-202 dated April 2012 remain unchanged.
a. The CRA will continue to accept that a stated monetary value is not required on a gift certificate where it can be easily determined by the parties involved in the transaction or where the gift certificate is for a supply of a specified product or service identified on the certificate as per P-202.
b. Whether the retail list price for the specified product or service is a way the parties to the transaction can easily determine the value of a gift certificate as per P-202 is a question of fact.
3. A gift card that entitles a person to redeem the card for a particular or specified product or service will still be considered a gift certificate if all the attributes listed in P-202 are met.
4. A gift card that is redeemable for a time-limited (e.g., 30 or 60 days, 3, 6 or 12 months) subscription service will still qualify as a gift certificate where all the attributes listed in P-202 are met.
5. Each of the named gift cards listed in Gift Cards A to Gift Cards E qualify as a gift certificate for purposes of section 181.2.
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 rulings given in this letter provided that: none of the issues discussed in the rulings 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.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-324-7413. 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
General Operations and Border Issues Division
GST/HST Rulings Directorate
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