Cases
Canadian Imperial Bank of Commerce v. Canada, 2021 FCA 96
The appellant (CIBC) was charged by Aeroplan for the number of Aeroplan Miles that were credited to the cards of CIBC cardholders. CIBC argued that these fees were (1) consideration for intangible personal property (the Miles) that were supplied by Aeroplan, and (2) that such property was exempted from GST as being a supply of “gift certificates.”
Webb JA rejected the first argument in light of the terms of the agreement between CIBC and Aeroplan, which he found essentially labelled the fees as being for promotional and marketing services. Given this finding, it was unnecessary for him to address the gift certificate argument, but he nonetheless stated (at para. 69):
Nothing in these reasons should be construed as an endorsement of the Tax Court Judge’s conclusion that Aeroplan Miles are not a gift certificate or that in order to qualify as a gift certificate, the property must have attributes similar to money.
In his dissenting reasons, Stratas JA found (at para. 77):
[T]he element that gives the supply commercial efficacy—the predominant element of the supply—is the right to allocate Miles. But for the right to allocate Miles, there would have been no point in the parties performing their other obligations.
Stratas JA went on to indicate that the Miles acquired by CIBC were deemed under the gift certificate rule (ETA s. 181.2) not to be a supply, so that the fees were not subject to GST, stating (at para. 90):
In the commercial world, Miles function as gift certificates. … They are an exchange device because they may be used as consideration for property or services in the same way as money or a gift certificate. Aeroplan accepts Miles as consideration for airline tickets, merchandise or gift cards with few conditions on their redemption. This is not a case like Canasia Industries Ltd. v. The Queen, 2003 TCC 3, 2003 G.T.C. 647 where the onerous conditions on redemption meant the reward points in that case did not function like exchange devices.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply | agreement between bank and Aeroplan labelled the bank as receiving promotional services rather than purchasing Aeroplan Miles (being, mooted gift certificates) | 477 |
| Tax Topics - Excise Tax Act - Section 309 - Subsection 309(1) | Tax Court not bound by an admission contrary to the evidence before it | 173 |
| Tax Topics - Income Tax Act - Section 171 - Subsection 171(1) | Tax Court not bound by an admission contrary to the interpretation of an agreement reviewed by it | 174 |
| Tax Topics - Other Legislation/Constitution - Federal - Federal Courts Act - Section 27 - Subsection 27(1.3) | fresh argument could not be made by taxpayer at the Court of Appeal level | 190 |
See Also
The Toronto-Dominion Bank v. The King, 2024 TCC 50
An affinity program agreement with Aeroplan allowed TD to add Aeroplan Miles rewards to its credit cards. Graham J found that Aeroplan was making a single supply under the agreement of the Aeroplan Miles rather than, as contended by the Crown, marketing services.
In then finding that the Aeroplan Miles purchased by TD were not gift certificates, but were coupons, so that their purchase was subject to HST, Graham J stated (at paras. 238-239):
[F]or a device to be a gift certificate, it must have the following key characteristics:
(a) The device must have a stated monetary value that either appears on the device’s face or is retrievable electronically.
(b) It must be possible to transfer the device to a third party without additional payment to the issuer.
(c) The bearer must be entitled to apply some or all of the balance of the stored monetary value to the purchase price of goods or services purchased from either the issuer of the device or any other person who can lawfully accept the device as payment.
(d) The device may have some conditions, but any such conditions must not detract from the essential attribute of a gift certificate that it must have attributes similar to those of money.
An Aeroplan Mile had none of these characteristics. It did not have a stated monetary value and thus that value could not be applied towards a purchase. It was not transferrable without paying a fee to Aeroplan. Finally, the need to accumulate more Aeroplan Miles in order to use a single Aeroplan Mile was a significant condition on the device’s use.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply | the single supply test entails a predominant element, not a predominant purpose, test | 246 |
| Tax Topics - Excise Tax Act - Section 306.1 - Subsection 306.1(1) | CRA was aware that the ancillary issue that was not explicitly raised was included in the objection | 84 |
Canadian Imperial Bank of Commerce v. The Queen, 2019 TCC 79, aff'd 2021 FCA 96
CIBC was charged by Aeroplan for the number of Aeroplan Miles that were credited to the cards of CIBC cardholders. CIBC argued that these fees were (1) consideration for intangible personal property (the Aeroplan Miles) that were supplied by Aeroplan, and (2) that such IPP was exempted as being a supply of “gift certificates.”
Visser J found that CIBC received a taxable service from Aeroplan, so that it was unnecessary for Visser J to consider the second argument – but he nonetheless did so, and found that the Aeroplan Miles did not qualify as gift certificates, stating (at paras 80, 83):
… Parliament intended a gift certificate to be an equivalent to money, and to have attributes similar to money. Therefore in my view, a gift certificate must have a stated monetary value expressed on its face physically or retrievable electronically. …
… Aeroplan Miles … fatally, they do not have a stated monetary value. While Aeroplan Miles no doubt have value to an Aeroplan member, and that value can be determined pursuant to a valuation, that is not equivalent to having a stated monetary value on their face or retrievable electronically.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply | Aeroplan points program occurred as single supply | 264 |
| Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Service | Aeroplan Miles were supplied by Aeroplan to CIBC as a taxable service | 376 |
| Tax Topics - Excise Tax Act - Section 138 | supply of Aeroplan Miles was ancillary to promotional services | 370 |
Royal Bank of Canada v. The Queen, [2007] 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 rejecting (at para. 47) the Minister's submission "that the Points cannot be gift certificates for want of a stated or face value," Hershfield J stated (at para. 51) "that if the certificate entitles the holder to an identifiable supply, it can still be a gift certificate," and found (at para. 55) that here "the Points cannot be considered to be a gift certificate…as there is no fixed correlation between the Points issued and their use."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Financial Service - Paragraph (l) | taxable supply of frequent flyer points | 146 |
| Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Supply | taxable supply of frequent flyer points | 207 |
| Tax Topics - Excise Tax Act - Section 181 - Subsection 181(1) - Coupon | frequent flyer points could be coupons | 114 |
| 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 | 330 |
| 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 | 262 |
Administrative Policy
31 July 2023 GST/HST Interpretation 217772 - Complimentary gift cards
A supplier issues gift cards with stipulated monetary values to purchasing customers, which they can use at its stores or at its e-commerce portal, However, to promote products or as a customer service gesture, the supplier also issues “complimentary gift cards” whose “complimentary value,” when applied by the customer, is treated by it as consideration for the goods or services supplied. Customers can purchase additions (“top-up values”) to such cards.
CRA indicated that, subject to satisfaction of conditions listed by it, the complimentary value of a gift card could be treated as a “coupon” so that, in the case of a (non-zero-rated) taxable supply, the supplier could claim an ITC under s. 181(3)(b) for the tax fraction of the complimentary value on the gift cards’ redemption. CRA went on to note that any top-up value added to the gift card would generally be considered the issuance or sale of a gift certificate for consideration and, when redeemed for a supply of property or services, would be deemed to be applied as money as described in s. 181.2. CRA further stated:
Gift cards issued in circumstances when an item is returned without a receipt would generally be considered to be issued for consideration; the value of the returned item being the consideration pursuant to paragraph 153(1)(b). Consequently, a gift card issued in this circumstance would generally be considered a gift certificate for purposes of section 181.2.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 181 - Subsection 181(1) - Coupon | conditions for accepting a complimentary gift card as a coupon | 465 |
11 August 2022 GST/HST Ruling 210068r - Whether gift cards are gift certificates
The company, a resident GST/HST registrant, purchases gift cards either directly from the issuers, or indirectly from a third party wholesaler, in either case for resale to its customers. These cards (which can be in physical form or be digital gift cards) included:
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; and
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 for a set time period.
Each such card requires the customer to have an account with the card issuer.
Before concluding that the gift cards as described to it qualified as gift certificates under s. 181.2, CRA ruled:
- A gift certificate can be in physical or digital format (e.g., a digital code) to qualify.
- The CIBC decision (where the majority pointedly declined to comment on the finding in the Tax Court below “that in order to qualify as a gift certificate, the property must have attributes similar to money") has not affected CRA’s current policy in P-202.
- “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” – which is a question of fact.
- A gift card that entitles a person to redeem the card for a particular or specified product or service, or that is redeemable for a time-limited (e.g., 6 months) subscription service will still qualify as a gift certificate where all the attributes listed in P-202 are met.
CBAO National Commodity Tax, Customs and Trade Section – 2013 GST/HST Questions for Revenue Canada, Q. 35.
Policy Statement P-202 issued in April 2013 but effective back to January 1, 1991, retroactively changed CRA's policy so as to consider that devices or vouchers, which entitled the bearer to receive property or a service but which did not have a stated monetary value, qualified as gift certificates, subject to s. 181.2. This could result in double taxation to suppliers who in reliance on the previous policy had collected GST at the time of sale of the voucher and not on redemption. When asked to confirm that it would not assess such registrants, CRA stated:
Audit will exercise discretion if it encounters situation in which a registrant has been acting in accordance with the Policy Statement P-202 Gift Certificates as it read before the revised policy statement was released in April 2012. Audit will consider the particular circumstances of the registrant and the steps taken by the registrant to comply with the revised policy statement.
23 April 2013 Ruling Case No. 141283 [vouchers applied to purchase goods up to dollar limit were coupons]
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.
P-202 "Gift Certificates" April 2012
The Canada Revenue Agency considers a gift certificate to have all of the following attributes:
- It has a monetary exchange value that is evident on the certificate or that is easily determined by the parties involved in the transaction. The monetary exchange value may, for example, be specified on the face of the certificate or it may be stored on the certificate electronically. In certain cases, the customer may be permitted to add additional amounts to the monetary exchange value of the certificate. Alternatively, the gift certificate may be for a particular supply of property or a service that is identified on the certificate.
- It is issued or sold for consideration by the supplier of the property or service or another party for use at a particular supplier. The consideration paid for the certificate may not necessarily be the same as the monetary exchange value.
- It is accepted as payment or partial payment of the consideration for a supply of property or a service offered by the supplier of that property or service.
- It does not require the bearer to do anything to redeem the certificate other than to present it as a means of payment or partial payment for the property or services being acquired. The holder of the certificate should not be required to meet other conditions, such as, making a purchase of a particular value (i.e., a required minimum value) or purchasing one item to exchange the gift certificate for another item (e.g., buy one, get one free) in order to redeem the certificate.
- It does not have any intrinsic value. The certificate should not have any value other than its monetary exchange value.
24 October 2011 Ruling Case No. 138563
CRA rules that a number of gift cards sold by the registrant are gift certificates for HST purposes, including certificates that must be declared ahead of time to be useable. For example, one of the cards is for lodge accommodations, and card-holders must recite a number on the card at the time they call to book the accommodation in order to be entitled to redeem the card at the time of payment.
27 September 2011, Ruling Case No. 131157
The registrant sells certificates to the general public, entitling them to discounts from various businesses. For example:
The RestaurantCo certificate offers discounts at […] locations in […] [Participating Province X]. The certificate lists the discount provisions and a sample menu. The certificate has a value of over $[…] and is sold for $19.99. It has four components:
- A single use [dining] offer of a […]% discount on food total (maximum value $[…])
- […] free dinner entrees: Buy one, get one
- […] free lunch entrees: Buy one, get one
- Purchaser will receive $[…] in RestaurantCo cash with every catered order over $[…]
CRA rules that the certificates are not gift certificates for GST purposes, as they do not have a monetary value.
11 August 2011 Headquarters Letter 127020
The owner and operator of a social networking site (the "Supplier") sells memberships online or through the sale of physical membership cards at stores of retailers across Canada (with the purchasers then activating the purchased cards to initiate their online memberships). These "Membership Cards" are distributed to the retailers using a distributor, who shares the commissions it receives from the Supplier with the retailers. Asked whether the Membership Cards were gift certificates for HST purposes, CRA stated:
A Membership Card is a "device" in the form of a plastic card with an electronically readable magnetic strip and a PIN number hidden beneath a scratch-off area on its back. Each Membership Card has a monetary value and is sold by the Supplier through intermediaries. At the time that a Membership Card is redeemed via the Website, the Supplier accepts a Membership Card as consideration for a supply. The Membership Card sold by the Supplier therefore constitutes a gift certificate such that section 181.2 applies.
19 July 2011 Headquarters Letter 127619
The registrant enters into marketing agreements with various merchants to promote their businesses by selling vouchers on its website on their behalf, which are redeemable for goods or services offered by the merchants, and by promoting such goods and services on the website and through other channels. The vouchers are sold at a discount from their face amount - but with the merchants agreeing to honour them at their face amount. After finding that the registrant is not supplying financial services (so that the commissions earned by it from the merchants are not exempt), CRA remarks that:
Since the Agreement indicates that the merchants intend to supply the goods and services otherwise valued at the regular price for the promotional price paid for the voucher, the value of the consideration upon which GST/HST must be accounted for should be determined by reference to the [discounted] promotional price.
CRA also provides a definition of "gift certificate" (differing in some respects from that in Policy Statement P-202):
The term "gift certificate" is not defined in the ETA. Generally, the Canada Revenue Agency considers the following criteria in determining whether a particular device is a gift certificate. A gift certificate is a device (e.g. voucher, receipt, ticket)
- that usually has a monetary value or is for a particular supply of property or service
- that can be redeemed on the purchase of property or a service from a particular supplier; i.e. the supplier agrees to accept the device as consideration, or a part thereof, towards the purchase of property or a service,
- for which consideration was given, and
- that has no intrinsic value.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Financial Service | 64 |
2000 Headquarters Letter RITS/No. HQR0001726 (8120)
A gift certificate would not qualify as a gift certificate for purposes of s. 181.2 when sold at a discount to a non-profit organization; but would so qualify when sold for its face value by the non-profit organization to individuals.