20 July 1990 Ministerial Correspondence 900224 F - Cash Award or Prize

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

July 20, 1990

Dear Sirs:

Re: Cash Award or Prize

This is in reply to your letter dated March 15, 1990 wherein you have queried the interpretation that should be given to the comments found on page 39 of the 1989 Employers and Trustees Guide. Your reference is to the following: "if prizes, cash awards or awards in kind are made available directly by the manufacturer to a dealer, the manufacturer is not required to report these on the information slip. When the dealer then passes this cash award or prize, whether in cash or kind, to an employee, it is the dealer's responsibility to report the cash payment or value of the benefit...However, if the manufacturer pays a cash award or a prize directly to an employee of a dealer or other sales organization, the value of the award or prize is a benefit which must be reported by the manufacturer."

You have asked whether the marketing company is considered the "dealer" with the responsibility for reporting the benefit on a T4A information slip or whether the distributor is considered to have given the gift directly to the employee in the following hypothetical situation:

•     the three parties involved - a distributor, marketing company and a retail salesperson - are not related to one another;

•     the marketing company is engaged by its customers to administer retail sales incentive programmes. It produces a gift catalogue comprised of various products. This catalogue does not necessarily carry the products of its customers;

•     under a plan initiated by the distributor, a retail salesperson earns points for each product of the distributor sold by him. Once the required number of points are accumulated, he may submit a prize sheet to the marketing company requesting a gift selected from the marketing company's catalogue;

•     the marketing company sends the gift directly to the salesperson. It periodically bills the distributor for the gifts awarded, including a fee for its services;

•     the distributor is not provided with the names of the particular retail salesperson in receipt of gifts;

We are of the opinion that the responsibility for preparing any necessary information slips as required by Regulation 200 of the Income Tax Act rests with the distributor. It would appear that the marketing company does not have discretion in determining whether any given employee should be or will be awarded the prize or a cash equivalent but merely dispatches a prize to a retail salesperson pursuant to its agreement with the distributor, when that employee has qualified under a merit system that is under the control and direction of the distributor (i.e. the marketing company is simply paid a fee by the distributor to provide the service of administering an incentive program initiated by the distributor).

We trust that the above comments are of assistance to you.

Yours truly,

for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch