GST/HST on gift cards in Canada is usually charged when the card is redeemed, not when it is sold. If a customer pays $100 for a qualifying gift card, you generally collect $100. When someone later uses that card to buy a taxable product or service, you calculate GST/HST on the full selling price and treat the card like cash toward the total.
GST/HST on gift cards in Canada: the basic rule
The CRA says the issuance or sale of a qualifying gift certificate is deemed not to be a supply. That means no GST/HST is payable when the certificate is issued or sold. For this rule, "gift certificate" can include a physical gift card or an electronic certificate that meets the CRA's characteristics.
At redemption, the gift card is treated as money toward the purchase:
- Calculate GST/HST on the price of the taxable product or service
- Add the tax to the customer's bill
- Deduct the gift-card balance from the total amount owing
- Collect any remaining balance using another payment method
The card changes how the customer pays. It does not reduce the taxable price of what you sold.
Example: redeeming a gift card in Ontario
Suppose a customer buys a $50 salon gift card. The salon does not charge HST when it sells the card, so the customer pays $50.
Later, the recipient books a taxable $100 service in Ontario. The salon calculates 13% HST on the full $100 service:
- Service: $100
- HST: $13
- Total: $113
- Gift card applied: $50
- Remaining amount due: $63
Do not calculate HST only on the $50 balance paid after the card. The gift card is a payment method, not a discount.
What qualifies as a gift certificate?
The CRA looks at the arrangement, not only the label. A qualifying gift certificate generally has a stated monetary value or can be applied toward goods or services and can be presented as payment. It has no intrinsic value beyond being exchanged with the issuer or participating merchants.
A coupon, event ticket, prepaid telephone card, membership, or voucher for one specifically identified item may follow different rules. Promotional cards issued free of charge can also need separate analysis. If your product is more like a discount, entitlement, or prepaid contract than stored value, do not assume the gift-certificate rule applies just because you call it a gift card.
Does selling a gift card count toward the $30,000 threshold?
Because the issuance or sale of a qualifying gift certificate is deemed not to be a supply, the amount received at that point is not consideration for a taxable supply. Do not add it to your taxable-supplies total merely because cash entered your account.
When the card is redeemed for a taxable sale, the pre-tax value of that sale is part of your taxable supplies and can count toward the small-supplier threshold. Track the taxable sale once at redemption rather than counting both the original card payment and the later purchase.
Review how the $30,000 GST/HST threshold works, including the single-quarter and four-consecutive-quarter tests. You can use HST Hero to record taxable sales when gift cards are redeemed and monitor your rolling threshold without double-counting the original card sale.
What if the purchase is exempt or zero-rated?
The tax treatment comes from what the customer buys. If a gift card is redeemed for a zero-rated item, GST/HST applies at 0%. If it pays for an exempt supply, you do not add GST/HST. For a mixed basket, calculate tax only on the taxable items at the applicable rate.
The distinction affects both the customer's bill and your records. See zero-rated vs exempt supplies in Canada for the practical difference.
Can the buyer claim an input tax credit?
A GST/HST registrant generally cannot claim an input tax credit from the purchase of the gift card itself because no GST/HST was charged. If the card is later used to buy an eligible expense for commercial activities, the purchaser may be able to claim an ITC based on the GST/HST charged on that underlying purchase.
Keep the final receipt or invoice showing the supplier, taxable purchase, GST/HST amount, and other required details. A card receipt showing only that $100 of stored value was purchased does not prove that tax was paid. Review the input tax credit documentation rules before claiming the amount.
Keep card sales and redemptions separate
Set up separate records for gift cards issued, redeemed, and still outstanding. Your point-of-sale or bookkeeping system should let you reconcile:
- Money received and outstanding card balances
- Taxable, zero-rated, and exempt sales paid with cards
- GST/HST collected when taxable purchases occur
- Refunds, replacements, and expired balances
The bottom line
Do not charge GST/HST when you sell a qualifying gift card. Charge the applicable tax when the card is redeemed for a taxable product or service, using the full selling price before applying the card balance. Record the taxable sale once, keep the redemption invoice, and confirm unusual promotional vouchers or single-purpose arrangements against CRA Policy Statement P-202 or with a qualified Canadian tax professional.