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.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 127289
Business Number: [...]
November 23, 2010
Dear [Client]:
Subject:
GST/HST RULING
GST/HST ruling on Game Cards
Thank you for your letter of August 5, 2010, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) on Game Cards.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Statement of Facts
We understand from your letter that you require confirmation of the GST/HST status of the supply of certain Game Cards that [...] (the "retailer") sells to its customers. The Game Cards for which you are asking us to issue a ruling are the following:
1. [...] [Game Card 1] allow[s] customers to download this game online after card is activated [...]. To redeem the cards, the cardholders must go on the [...] system, [...] system or [...] to enter the PIN number necessary to download the game. The PIN number is found at the back of the card. [...].
2. [...] [Game Card 2] allow[s] the users to download several games, add-ons and more after card is activated. To be redeemed, the cardholders must go on the [...] system, [...] system or [...] to enter the PIN number necessary to download the game. The PIN number is found at the back of the card. On the back of the card it says [...].
3. [...] [GPS Card 3] allow[s] customers to download update[s] for their maps for their GPS device. Cardholders must go online to proceed with the update of the maps that are already installed on their [...] GPS device. To do so, the cardholders must enter the activation number found on the back of their cards. [...].
4. [...] [Game Card 4] allow[s] customers to play online games and purchase virtual items. The cardholders must go on the website [...] to redeem it by entering the PIN code shown on the back of the cards.
5. [...] [Game Card 5] allows customers to play online games for [...] days only. The cardholder must accept the use and licence terms on the website to be able to access the games in order to redeem the card. [...]. The card is sold at $[...].
6. [...] [Game Card 6] allow[s] customers to download games after the card is activated. States at the back of the card that card must be redeemed [...]. To redeem the card, cardholder must go online and enter the PIN provided on the back of the card.
7. [...] [Game Card 7] allows customers to go on the [...] website to download games. [...].The cardholder must accept the use and licence terms on the website to be able to access the games in order to redeem the card. To redeem the card, the cardholder must enter the PIN code shown on the card.
8. [...] [Game Card 8] allow[s] customers to play up to [...] games online after the card is activated. The cardholder must go on one of the websites [...] to redeem the card by entering the code found on the back of the card.
9. [...] [Game Card 9] give[s] customers a membership for a period of [...] for the price of $[...] and $[...] respectively for online activities on the [...] website. [...]. To redeem the card, cardholder must go on the [...] website and enter the code found on the back of the card.
10. [...] [Game Card 10] give[s] customers access to online games and entertainment services accessible from [...] system for a period of [...]. To redeem the card, the user must enter the PIN number found on the back of the card. The [...] subscription is sold for $[...].
11. [...] [Games Points Card 11] for a retail price the customers purchase or [...] points which will allow them to do online shopping for games for their [...] system. To redeem the card, the cardholder must go to the [...] system and enter the PIN on the back of the card. The [...] points card is sold for $[...].
You also included in your submission a [...] card. Further research is required regarding this card in order the determine if the supply is one of telecommunication services or not, therefore this card will be the subject of a separate ruling that will be issued by the Services and Intangibles Unit. [...].
Ruling Requested
You would like to know how GST/HST applies to those Game Cards sold by [...] [the retailer].
Ruling Given
This ruling applies only to the physical cards sold by the retailer. Based on the facts set out above, we rule that the supply of:
1. [Game Card 1] as described above is a gift certificate for GST/HST purposes, subject to section 181.2, and, accordingly, is not subject to GST/HST at the time of the sale;
2. [Game Card 2] as described above is a gift certificate for GST/HST purposes, subject to section 181.2, and, accordingly, is not subject to GST/HST at the time of the sale;
3. [Game Card 3] as described above is a gift certificate for GST/HST purposes, subject to section 181.2, and, accordingly, is not subject to GST/HST at the time of the sale;
4. [Game Card 4] as described above is a gift certificate for GST/HST purposes, subject to section 181.2, and, accordingly, is not subject to GST/HST at the time of the sale;
5. [Game Card 5] as described above is a gift certificate for GST/HST purposes, subject to section 181.2, and, accordingly, is not subject to GST/HST at the time of the sale;
6. [Game Card 6] as described above is a gift certificate for GST/HST purposes, subject to section 181.2, and, accordingly, is not subject to GST/HST at the time of the sale;
7. Game Card 7] as described above is a gift certificate for GST/HST purposes, subject to section 181.2, and, accordingly, is not subject to GST/HST at the time of the sale;
8. [Game Card 8] as described above is a gift certificate for GST/HST purposes, subject to section 181.2, and, accordingly, is not subject to GST/HST at the time of the sale;
9. [Game Card 9] as described above is a gift certificate for GST/HST purposes, subject to section 181.2, and, accordingly, is not subject to GST/HST at the time of the sale;
10. [Game Card 10] as described above is a gift certificate for GST/HST purposes, subject to section 181.2, and, accordingly, is not subject to GST/HST at the time of the sale;
11. [Games Points Card 11] as described above is a gift certificate for GST/HST purposes, subject to section 181.2, and, accordingly, is not subject to GST/HST at the time of the sale.
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
To be a gift certificate, the gift card must entitle the bearer to a particular supply of goods or services or a reduction of the total amount of money payable (i.e. consideration plus applicable taxes including GST/HST) for any supply of goods or services supplied by the issuing vendor [...]. Furthermore, a gift card must have all the characteristics of a gift certificate as described in GST/HST Policy Statement P-202, Gift Certificates, to be considered a gift certificate for purposes section 181.2 of the ETA; in other words, for a gift card to be considered a gift certificate, the gift card:
a) must have a specified value or be for a particular supply of property or services;
b) be redeemable for the purchase of property or services;
c) consideration must have been given; and
d) have no intrinsic value.
The above-noted Game Cards meet all the characteristics of gift certificates.
Where a card is determined to be a gift certificate for purposes of section 181.2 of the ETA, the supply of that gift certificate is deemed not to be a supply and therefore no GST/HST is to be collected on the supply of that card. When that card is redeemed, it is treated like cash and the redeeming party, if a registrant, is required to charge and collect the GST/HST on the value of the consideration where the supply is a taxable supply (other than a zero-rated supply).
We acknowledge that one of the cards states the "any applicable taxes must be paid separately and are not included". However, a gift certificate is always to be treated as money, therefore GST/HST applies upon redemption of the gift certificate when the supply is made, not at the time of purchase of the gift certificate.
For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-8811 or Ken Syer, Manager, at 613-952-9219. 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,
Jasmine Gallant
Specialty Tax Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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