Subsection 181(1) - Definitions
The appellant, a registered cellphone service provider ("TM"), offered customers "Billing Credits" when they signed up for longer term contracts (e.g., two years). At issue were Billing Credits that were provided to customers who did not purchase their phones directly from TM, so that they were provided as a credit on TM's invoices rather than as a discount on phone purchase. In finding each such credit was not a "coupon" C Miller J stated (at TCC para. 26) that "it is not some thing entitling the customer to the reduction - it is the reduction itself," and (at TCC para. 27):
The use of device suggests that the legislators acknowledged commerce has entered a technological age where paper may indeed become completely outdated. As the Appellant suggested, the standard commercial practice has evolved with the advent of e-commerce and instead of issuing a paper coupon, a customer's entitlement to a reduction in purchase price can be effected electronically. I do not see how this approach, however, helps the Appellant, as it has pointed to nothing held by the customer, electronically or otherwise, entitling the customer to the credit. The customer simply gets it.
Mainville JA's reasons explicitly adopted C Miller J's statements in paras. 26-27.
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|Tax Topics - Excise Tax Act - Section 181.1||170|
The appellant claimed input tax credits under ETA s. 181(5) on the payment of the value of “instant rebate coupons” (IRCs) on different Nestlé products sold to consumers at a discount through Costco Wholesale Canada Ltd. (Costco) on the basis that they were coupons within the meaning of s. 181(2), whereas the Minister considered the IRCs instead were promotional allowances under s. 232.1. The IRCs provided purchasers at Costco warehouses with a fixed dollar discount on the purchase price of taxable Nestlé Products, whose amount was posted on the Costco warehouse shelves. The cash register receipt showed the GST/HST applied to the full purchase price, and then a deduction for the IRC amount. The contracts between the appellant and Costco governing the IRCs did not mention that any part of the reimbursements paid by the Appellant to Costco (for 100% of the IRC values) were on account of tax. The appellant and Costco treated the discounts similarly to paper coupons provided by the appellant, which might be kept with the store cashiers and scanned at the time of the customer purchase.
In finding that the IRCs did not qualify as coupons, Lamare ACJ stated (at paras. 29, 30, 31):
The FCA, in Tele‑Mobile, made it clear that there cannot be a coupon unless something is submitted by the purchaser for acceptance as full or partial consideration for the taxable supply, and the coupon thus tendered, whether physical or electronic, must entitle the purchaser to a reduction of the price equal to a fixed dollar amount specified on the physical or electronic device.
…[W]hen the Nestlé product was purchased by the customer, the customer did not tender any coupon (physical or electronic) to the cashier. …
It is true that here there was an 8 1/2” x 14” on‑the‑shelf sign…[but] Costco was merely advertising the discount.
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|Tax Topics - Excise Tax Act - Section 232.1||reductions in sales price to refund discounts provided by wholesaler were promotional allowances||182|
|Tax Topics - Statutory Interpretation - Hansard, explanatory notes, etc.||acceptance of oral Crown statement as to provision's purpose||122|
Royal Bank of Canada v. The Queen,  GSTC 122, 2007 TCC 281
A Canadian airline ("CAIL") entered into an agreement with the appellant ("RBC") to promote use of RBC's credit card and to honour frequent flyer points to be awarded by it to RBC at the rate of one Point for every dollar of qualifying credit spending. After finding (at para. 55) that "the Points cannot be considered to be a gift certificate…as there is no fixed correlation between the Points issued and their use," Hershfield J went on to state obiter (at para. 60) that "Points can indeed by coupons even though they can only be used in fixed blocks that are sufficient to ensure that the taxable excess is always nil."
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|Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Financial Service - Paragraph (l)||taxable supply of frequent flyer points||140|
|Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply||taxable supply of frequent flyer points||197|
|Tax Topics - Excise Tax Act - Section 181.2||frequent flyer points not gift certificates||119|
|Tax Topics - Excise Tax Act - Section 278 - Subsection 278(2)||s. 278(2) precluded direct collection on assessment of recipient until supplier released from remittance obligation under CCAA||316|
|Tax Topics - Excise Tax Act - Section 296 - Subsection 296(1) - Paragraph 296(1)(b)||no double taxation in s. 296(1)(b) assessment of purchaser because supplier had been released from its remittance obligation under CCAA plan||252|
23 April 2013 Ruling Case No. 141283 ["gift certificates" applied to purchases up to dollar maximum]
USco is a US-based company which sells vouchers (labeled as "gift certificate") to employers who in turn give them to their employees as holiday gifts. The employees use the vouchers (which entitle the bearer to receive, without charge, a product with a monetary value up to a stated dollar maximum) to get free or substantially discounted products. Where the value of the product exceeds the dollar limit of the voucher, the bearer pays the difference. Upon redemption of a voucher from a retailer, USco reimburses the retailer for the price of the product up to the dollar limit of the voucher, and also pays the retailer [redacted]. The retailer submits the voucher to USco through its usual coupon redemption process. If the price of the product is less than the dollar limit of the voucher, USco will retain the difference as additional revenue.
Ruling that the vouchers are coupons rather than gift certificates.
19 April 2011 Interpretation 112537
In order to promote and encourage customer loyalty, A Co. established and maintained a "points" system (the "Loyalty Points"). Customers may earn points based on the amount of telecommunication services purchased, which may be redeemed towards the purchase of the cellular telephones. CRA stated:
The definition of "coupon" in subsection 181(1) includes a voucher, receipt, ticket or other device. CRA has stated that the redemption of points is viewed as the redemption of a coupon. Therefore, the Loyalty Points awarded to customers as a result of consumption of telecommunication services, on special occasions such as birthdays, or upfront based on the expectation of future consumption of telecommunication services can be viewed as a coupon upon redemption; the awarding of the points to customers is considered a taxable supply that does not attract GST/HST where there is no consideration charged to the customers for the supply.
25 February 2005 Ruling Case No. 56925 [discount not a device]
An electronic discount made available by the manufacturer to all purchasers of the particular product from the retailer would not be considered to be a coupon, as the purchasers would not be in possession of any device that entitled them to a price reduction, and the retailer would not be accepting any device in full or partial consideration for the supply made by it. Instead, the promotional allowance rules in s. 232.1 would apply.
GST M 300-7 "Value of Supply" under "Coupons"
Because the payment or receipt of the reimbursement is deemed not to be a financial service, it will not affect the third party's eligibility to claim ITCs with respect to any GST paid on supplies used to provide the reimbursement. The sale of coupon books, such as "entertainment books" is a taxable supply.
Subsection 181(2) - Acceptance of Reimbursable Coupon
GST M 300-7 "Value of Supply" under "Manufacturers' Rebates"
General synopsis. GST will apply to co-operative advertising payments in the normal manner.
GST M 300-7-6 "Manufacturers' Rebates"
Subsection 181(3) - Acceptance of Non-Reimbursable Coupon
The appellant, a registered cellphone service provider ("TM"), offered customers "Billing Credits" when they signed up for longer term contracts (e.g., two years). At issue were Billing Credits that were provided to customers who did not purchase their phones directly from TM, so that they were provided as a credit on TM's invoices rather than as a discount on phone purchase.
Although C. Miller J. found that these credits were not coupons under s. 181(3) (but, rather, were "straightforward discounts[s]" (para. 29)), so that TM was not entitled to input tax credits under s. 181(3)(b), he accepted that a "coupon" could be provided electronically. Regarding the criterion in s. 181(3) that a coupon be for a fixed dollar amount, he stated (at para. 35):
In this day and age of electronic commerce and the use of purchase and sale devices not contemplated 20 years ago, I am of the view that where the fixed amount is clearly known to both sides, and is evidenced in writing, as hard copy or electronically, that can be offered by a customer as partial consideration, the requirement has been met.
C. Miller J. also indicated (at para. 38) in obiter dicta that coupons need not be for a single fixed amount - for example a $50, $100 and $150 discount for a 1-year, 2-year or 3-year contract on the same coupon would be acceptable.
A further arrangement under which customers who purchased TM phones (generally from third-party stores) received coupons, mailed them in to a TM agent, and received a rebate cheque from the agent also did not entitle TM to input tax credits under s. 181(3)(b) as the coupons were not accepted by the supplier of the phones (the third parties) and also because the coupons were not accepted by TM "as consideration for anything" but rather were a rebate ("money that is paid back" (para. 58).
Subsection 181(4) - Acceptance of Other Coupons
28 March 2002 Interpretation 34565
A member of a frequent flyer award program exchanged accumulated credits (XXXXX Miles) in exchange for an award ticket for travel within North America and also was required to pay various airport taxes as well as the GST ($44 U.S. funds) in respect of the award ticket. Was such GST collectible? After noting that the flight was not zero-rated under Sched. VI, Pt. VII, s. 3 and that
the definition of "coupon" encompasses intangible devices that have the characteristics of a traditional paper coupon…[including] the type of mileage credit issued [here]
The CCRA has taken the position that subsection 181(4) applies to coupons that are accumulated and redeemed after certain thresholds are met (e.g. points, award miles or other similar devices).
… Therefore, airlines...would be required to collect the GST/HST on the net value of the consideration for the award ticket once the accumulated mileage credits have been applied to reduce the value of the consideration for the supply. When a coupon is accepted as the total consideration for a supply, then no GST/HST is payable.