Words and Phrases - "in the course of a commercial activity"

a
87
b
44
c
77
d
51
e
38
f
31
g
18
h
14
i
74
j
2
k
2
l
32
m
56
n
25
o
38
p
80
q
3
r
76
s
90
t
46
u
16
v
9
w
23
y
2

President's Choice Bank v. The Queen, 2022 TCC 84, rev'd 2024 FCA 135

Summary Under
Tax Topics - Excise Tax Act - Section 181 - Subsection 181(5)
a credit card company incurred the obligation to redeem loyalty points in the course of its exempt credit card business

A corporation (“PC Bank”) in the Loblaw group, whose business was to grant credit through the operation of a MasterCard program, obtained the right to issue loyalty points (“PCB Points”) from an affiliate (the owner of rights to the program) and then started issuing PCB Points to its cardholders “to entice them to use their PC MasterCards frequently in order to accumulate PCB Points that could be used to acquire discounted or free goods from Loblaws” (para. 53), and received payments of $0.75 from Loblaws for each $1.00 of sales made by Loblaws to such cardholders (that generated such points). When the PCB Points were so redeemed by the cardholders for purchases from Loblaws, PC Bank was obligated to pay the cash value of the points to Loblaws. Loblaw also agreed to pay $0.35 to PC Bank for every $1.00 of notional value of PCB Points accumulated by a PC cardholder to the extent redeemed.

In finding that PC Bank was not entitled to input tax credits pursuant to s. 181(5) when paying the redemption amounts to Loblaws because such amounts were not paid “in the course of a commercial activity” of PC Bank, Hogan J stated (at paras. 67, 75):

PC Bank issued the PCB Points to generate revenue from its PC MasterCard portfolio. PC Bank earned significant revenue from interchange fees that pales in comparison to the minimal revenue it received from Loblaws. …

There is a direct link between the PCB Points that are issued in conjunction with an exempt financial service supplied by PC Bank to Cardholders and an expense that is paid when the PCB Points are redeemed by Cardholders.

Regarding the submission of PCB Bank that weight should be given to the fees generated by it from Loblaws, he stated (at para. 77):

It is unimaginable for me that the Appellant would accept to pay $1.00 to earn $0.35. Why would the Appellant issue points to lose money?

Words and Phrases
in the course of a commercial activity
Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Financial Service - Paragraph (r.3) automated credit and fraud processing services provided to credit card company were excluded under para, (r.3) 263
Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Financial Service - Paragraph (t) automated credit and fraud monitoring services were likely excluded under para. (t) 189