Gift card (prepaid purchase card)

How BC law treats it

Gift cards sold to consumers in BC are governed by the Business Practices and Consumer Protection Act, SBC 2004, c 2 (BPCPA) and the Prepaid Purchase Cards Regulation, BC Reg 292/2008. The general rules are that a card may not carry an expiry date and the seller may not charge fees that reduce the card's value, such as dormancy or activation fees. The regulation sets out exceptions to the expiry rule for cards issued or sold for a specific good or service, cards issued or sold for a charitable purpose, and promotional cards given for nothing or for less than their full value. It permits only limited fees, such as a fee to replace a lost or stolen card or to customize a card, and capped purchase and post-purchase fees on cards usable at multiple unaffiliated sellers, such as mall cards. Required information about the card's terms must be disclosed clearly to the buyer. Consumer Protection BC is the regulator that enforces these rules. It is not itself a statute. It can investigate complaints, issue compliance orders and impose administrative penalties, and consumers can bring claims for a breach of the BPCPA. For GST, section 181.2 of the federal Excise Tax Act, RSC 1985, c E-15 treats the sale of a gift certificate with a stated monetary value as not a supply. GST is charged when the card is redeemed for taxable goods or services, and the card is treated as a form of payment at that point. A card for a specific good or service, such as one massage, may be taxed when sold. BC PST generally follows the same pattern, but businesses should confirm the GST and PST treatment of their own cards with their accountant. If a business closes or becomes insolvent, unredeemed card balances are usually unsecured claims against the business. A buyer of the business should check how outstanding cards are handled in the purchase agreement.

What it means for your business

Retailers, restaurants, salons and e-commerce sellers in BC often copy gift card terms from US templates that include expiry dates or inactivity fees, which are generally not permitted here. Getting the terms wrong invites complaints to Consumer Protection BC, penalties and refund claims. Gift card balances are also a real liability on the balance sheet that matters in a sale of the business. Charging GST on dollar-value cards at the time of sale, rather than at redemption, overcollects tax and complicates bookkeeping. Example: A Kelowna spa sells $100 gift cards that state "expires 12 months from purchase". Because the BC regulation generally prohibits expiry dates on cards sold to consumers, the spa removes the expiry term and honours older cards.

Risks and common mistakes

Printing an expiry date or a monthly inactivity fee on gift cards sold to BC consumers. Charging GST when a dollar-value gift card is sold instead of when it is redeemed for taxable goods or services. Treating a free promotional voucher and a purchased gift card as subject to identical rules. Citing a "Consumer Protection BC Act", which does not exist, instead of the BPCPA and its regulation. Ignoring outstanding gift card balances when buying or selling a retail business.