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.
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
Excise and GST/HST Rulings Directorate
14th Floor, 320 Queen St.
Ottawa, ON K1A 0L5
Attention: XXXXX
Case Number: 12486
Business Number: XXXXX
July 21, 2010
Dear XXXXX
Subject:
GST/HST RULING
XXXXX Request for GST Ruling on Gift Certificate Product
Thank you for your letter of XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of a voucher that will be marketed across Canada by XXXXX (the Registrant) XXXXX under the name XXXXX.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
Our understanding of the facts is as follows:
1. The Registrant is incorporated under the laws of XXXXX to market XXXXX products in Canada.
2. The Registrant's vouchers will be sold to consumers XXXXX through retailers or by the Registrant directly through the internet.
3. The Registrant's products are in the form of vouchers that are redeemable by a purchaser (or any person to whom the purchaser gives the voucher) XXXXX.
4. The XXXXX vouchers do not bear a clear stated monetary value on the face of the product but are sold at predetermined prices.
5. XXXXX vouchers will be sold for specific categories of leisure activities XXXXX.
6. For each category of voucher, the Registrant arranges with third party service suppliers (the "Supplier") to provide the specific type of supply. The voucher is redeemable by the voucher holder for the specific type of service and no additional amount is payable for the service. Each voucher can be redeemed at more than one supplier.
7. Each voucher will be sold for a specified price. The price will vary depending on the category of leisure activity that a particular voucher is redeemable for. The voucher price is calculated to equate to the tax-inclusive price of the particular leisure activity when supplied by the Supplier. The tax disclosure requirements found in section 223 of the ETA will be met. The Supplier will then account for the GST amount in its return for the applicable reporting period.
8. The Registrant markets the voucher and administers the operation of the program. When a person buys a voucher from a retailer for the specified value of the particular voucher, e.g., the $100.00 activity card, the retailer activates the card and is paid a commission out of the sale proceeds plus applicable GST. The Registrant receives the balance of the sale proceeds and claims an input tax credit for the GST applicable to the retailer commission. When the voucher is redeemed by a voucher holder with a Supplier, the Supplier then tenders the voucher to the Registrant. In the example given above, the Registrant then pays the $100.00 to the Supplier. Concurrently, the Registrant charges the Supplier a commission for its services plus applicable GST/HST.
9. Under the agreement entered into with the Suppliers, the Registrant provides marketing and administrative services only. The Registrant does not act as agent for the Suppliers.
Ruling Requested
You would like a ruling confirming that the XXXXX voucher redeemable for specific services will be treated as a gift certificates under section 181.2 of the ETA and, accordingly, will not be subject to GST/HST at the time of sale to purchasers regardless of the sales channel used (retailer or directly through the internet).
Ruling Given
Based on the facts set out above, we rule that the sale of the XXXXX vouchers is not subject to GST/HST as they are considered to be gift certificates for purposes of section 181.2 of the ETA.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
Section 181.2 provides that the issuance or sale of a gift certificate is deemed not to be a supply for GST/HST purposes. Consequently, GST/HST is not payable on the consideration paid for the gift certificate. This section further provides that when the recipient redeems the gift certificate it is to be treated as money. That is, where the gift certificate is redeemed for a taxable supply of property or service (other than a zero-rated supply), GST/HST is applicable on the total consideration payable to the Supplier XXXXX.
Although, section 181.2 deems the sale of the gift certificate not to be a supply for GST/HST purposes, a person who makes that supply is still considered to be engaged in a commercial activity. Consequently, if registered for GST/HST purposes the person is entitled to claim input tax credits for GST/HST paid on its expenses related to this commercial activity provided the requirements under section 169 of the ETA are met.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613 952 9220. 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,
Larry Springstead
Industry Sector Specialist
Specialty Tax Unit
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
Email this Content