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Group Buying of Goods or Services

Group buying websites offer consumers the possibility of purchasing vouchers online. The vouchers are commonly referred to by other names such as “coupons” or “certificates.”  A voucher is sold only once a minimum number of consumers express interest in buying the voucher within a prescribed time limit. A voucher entitles the consumer to receive a good or service with a value generally greater than the price paid for the voucher. Consequently, the consumer benefits from a reduction in the regular price.

The GST and QST do not apply to the sale of a voucher, since a voucher is considered a gift card or a gift certificate for GST and QST purposes. However, the taxes are payable when a voucher is exchanged for a good or service and are calculated on the total amount paid for

  • the voucher;
  • the purchase of additional goods or services (where applicable).

Example 1

A consumer buys an $80 voucher online bearing the note “taxes not included.” The voucher entitles the consumer to a spa package valued at $200. The consumer presents the voucher to the merchant who must calculate the taxes as follows:

Spa package$200.00
Reduction-$120.00
Total after reduction$80.00
GST ($80 × 5%)+$4.00
QST ($80 + $4) × 9.5%+$7.98
$91.98
Voucher-$80.00
Total payable$11.98

The consumer pays the merchant the amount of $11.98 ($4 + $7.98), which is the amount of taxes owing calculated on the price paid for the voucher.

Example 2

A consumer buys a $50 voucher online bearing the note “taxes included.” The voucher entitles the consumer to dance lessons valued at $150. The consumer presents the voucher to the merchant who must calculate the taxes as follows:

Dance lessons$150.00
Reduction-$100.00
Total after reduction (taxes included)$50.00
Voucher-$50.00
Total payable$0.00

The consumer does not have to pay an additional amount since it is stated on the voucher that taxes are included. However, the merchant must calculate the taxes included in the amount of $50 as follows:

GST $50 × 5/114.975 = $2.17

QST $50 × 9.975/114.975 = $4.34

Example 3

A consumer buys a $20 voucher online bearing the note “taxes not included.” The voucher entitles the consumer to a meal valued at $40. At the merchant's place of business, the consumer buys a meal for $100 and presents the voucher to the merchant. The merchant must calculate the taxes as follows:

Meal$40.00
Reduction-$20.00
Total after reduction$20.00
Additional purchases+$60.00
$80.00
GST ($80 × 5%)+$4.00
QST ($80 + $4) × 9.5%+$7.98
$91.98
Voucher-$20.00
Total payable$71.98

The total amount payable by the consumer is composed of $60 for additional purchases and $11.98 in taxes ($4 + $7.98) calculated on both the additional purchases and the amount paid for the voucher ($60 + $20 = $80).

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