Gift cards

A business is planning to shut down.

It sold gift cards to customers (in the past).
There is a small balance in the liability account on the balance sheet (under $3k).

Most gift cards sold are small amounts ($50 or less).

I believe the best approach for the business will be to notify all its customers the business will shut down (in the near future) and to use gift cards as soon as possible.

Of course, there will be people who won’t bother using their gift cards.

When the business shuts down whatever gift card balance remains will be treated as follows.

(to close out gift card balance)

I included HST payable in the JE because this is an HST-registered business.

Have others used a similar treatment?

As no product or service was provided, there is nothing subject to HST.

I had a client who charged for missed appointments. No service, no GST. The full amount was declared as income.


With Gift Cards, it depends on the designation on the card. If a gift card is sold and provides for a free service, it is considered to have a GST/HST component. If the gift card is sold for a face value of say $50.00 or $20.00 to be applied to any product or service then there is no GST/HST component. Your proposed entry is valid for cards that have been issued for a specific servce. If the cards can be applied to any product or service you would not show any tax.

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Gift Cards

Example 2 – Gift cards

A GST/HST registered restaurant chain sells gift cards for consideration with the restaurant name and the phrase ‘‘Gift Card’’ imprinted on them. A customer purchasing the card chooses a monetary exchange value which is stored electronically on the card. The customer may pay additional amounts to the retailer to have the card topped up or reloaded with any amount at any time. The card may be used to purchase any goods or services at any restaurant of the chain and the amount payable for the purchase is electronically deducted from the balance stored on the gift card. If GST/HST is applicable, the GST/HST is also deducted from the balance. The cards have no intrinsic value.

Does section 181.2 apply to the gift cards issued by the restaurant chain?

Section 181.2 applies to the supply of the gift cards. The gift cards meet the conditions outlined above: they have a monetary exchange value stored on the card, they are issued for consideration, they are accepted as consideration for the supply of goods and services, the gift card holder is not required to do anything other than present the card as payment and the card has no intrinsic value. No GST/HST is payable on the issuance of the card. When the card is redeemed, GST/HST, if applicable, is imposed based on the consideration paid for the supply of the goods and services.


Yes indeed.

I’m not sure about that.

Quick search found:

A cancellation fee paid by a patient for a missed or cancelled appointment is treated as payment for the intended supply (i.e., treatment or other naturopathic service). Where the naturopathic service is taxable, the GST/HST will apply to the cancellation fee. The amount paid by the patient to the naturopathic doctor is deemed under section 182 to be a GST/HST-included amount. The patient is deemed to have paid and the naturopathic doctor, if a GST/HST registrant, is deemed to have collected the GST/HST on the cancellation fee at the time the fee is paid. However, where the naturopathic service is exempt, GST/HST will not apply to the cancellation fee.

This was from a bulletin about naturopathic doctors but I would say in general if the cancelled service is GST/HST taxable the cancellation fee would be as well.