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Tax on Gift Cards in Canada

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Receiving gift cards is one of the most amazing and exciting experiences one might face. Sometimes they wait for special occasions or events to receive gift cards, for instance on birthdays, new years, and Halloween. 

It has become very difficult to understand how gifting or gift cards work (giving and receiving) affects taxes. We created this essay to clarify the tax repercussions so you don’t get in trouble with the Canada Revenue Agency (CRA) when giving or receiving gift cards.

What are gift cards or gift certifications?

Gift cards, which come in the form of swipe cards or chip cards, are a variation of gift certificates that are provided by businesses. A certain sum of money is stored on the card and is available for use by the cardholder to make purchases from the business or firms that issued the card. Gift certificates are vouchers that let customers make purchases from one or more businesses for products or services.

Gift cards and certificate sales are exempt from taxes. However, if a consumer makes a purchase using a gift card or gift certificate, GST and QST must be computed on the full cost of the products or services, just like they would be if cash were being used. All or a portion of the purchase price is deemed to be covered by the value of the gift card or gift certificate.

When I buy a $50 or $100 gift card, do I have to pay taxes?

No. Gift cards are exempt from tax if they are purchased for a set dollar amount. When a taxable item is purchased with the card, the tax is added. For instance, if you use a gift card to purchase a coat, the tax would be due.

Key Points 

Businesses may provide gift cards in the form of gift cards or gift certificates. Sales of gift cards and certificates are exempt from tax if they are made for a certain sum. The tax is applied when a taxable item is bought with the card. According to the Canada Revenue Agency (CRA), the value of the gift card or gift certificate must be used to calculate the total cost of the goods or services.

Salman Rundhawa
Salman Rundhawa
Salman Rundhawa is the founder of Filing Taxes. Salman provides valuable tax planning, accounting, and income tax preparation services in Toronto, Mississauga, Oakville, and Hamilton.

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