Selling gift cards at a restaurant: when GST/HST applies and how to record them

Gift cards are good business for restaurants, and December is the busiest month. They also create a tax question that owners often get wrong: do you charge GST/HST when you sell a card, or when the guest uses it? Here is the general approach for restaurants in British Columbia and Ontario. The Canada Revenue Agency's policy statement and your accountant are the authority. For expiry dates and fees on gift cards, see the guides to provincial gift card rules.

Do you charge GST/HST when you sell a gift card?

No. The CRA's policy statement on gift certificates, P-202, explains that under section 181.2 of the Excise Tax Act, issuing or selling a gift certificate for consideration is deemed not to be a supply. So no GST/HST is charged at the time of sale. Revenu Québec says the same for the sale of a card in that province. The card is treated like a form of payment, not a product.

When does the tax apply?

When the guest redeems the card. At that point, the card is a way of paying for a supply, and the tax status of that supply decides whether tax applies. A restaurant meal is taxable, so GST/HST applies to the meal, and the card is used as payment. The tax is calculated on the meal, as it would be if the guest paid with cash.

Does the card cover the tax?

The supplier decides whether the value of a card includes or excludes tax, and the policy statement says suppliers should review their agreements and practices to decide. In practice, most restaurants allow a card to pay for the whole bill, including the tax, the same as cash. State your terms clearly on the card or in the terms of sale, for example "can be used toward any part of the bill". If your terms say otherwise, make sure the guest sees them.

How do you record a gift card sale?

Treat the money received as a liability, not as income. When you sell a card, you owe the holder a meal. Record the amount in a gift card liability account, and reduce it when the card is redeemed. Your accountant will set up the accounts so that your income statement shows sales when meals are served, and your GST/HST return reports the tax on the redeemed value.

How should your till handle it?

• Selling a card: record it as a gift card sale, with no tax.
• Redeeming a card: record it as a tender, like cash or a debit card, on a bill that has tax on the meal.
• Reporting: your sales reports should show gift cards sold and gift cards redeemed separately, so you can reconcile them.
• Balances: keep a record of each card's balance, whether a physical card or an electronic one.

If your system treats a gift card sale as a taxable sale, you may be collecting tax too early and remitting it before you owe it. Fix the setting.

What about promotional gift cards and bonuses?

A card you give away free as a promotion is different from one a guest paid for. A "buy a 100 dollar card, get a 20 dollar bonus" offer needs care: the bonus is generally a discount on future purchases, not a sale. How to treat it for tax depends on the details. Ask your accountant before you run a promotion, and check provincial rules on expiry for bonus value.

What about gift cards for third-party sales?

If you sell cards on behalf of a platform or another business, or you accept cards issued by someone else, the treatment can differ. Ask your accountant how to handle the settlement and the tax.

What records should you keep?

A list of cards sold, their value and date; a record of redemptions; unredeemed balances at year end; and your terms of sale. Auditors, accountants and the CRA may ask for them.

What about unclaimed balances?

Cards that are never used are a continuing liability in many cases, and provincial rules on expiry and unclaimed property can apply. Ask your accountant and your lawyer before you remove an unclaimed balance from your books.

What mistakes should you avoid?

• Charging GST/HST on the sale of the card.
• Failing to charge it on the meal when the card is used.
• Counting card sales as revenue before redemption.
• Not tracking balances.
• Running a promotion without checking the tax and expiry rules.

When should you ask your accountant?

When you launch a gift card program, when you change systems, and before December. Put the question in writing and keep the answer.

More guides for your business:

• GST/HST on tips and service charges: what Canadian restaurants must collect
• Hiring temporary foreign workers for a restaurant in BC or Ontario: where the low-wage rules stand in 2026
• Music licences for restaurants and bars in Canada: SOCAN, Re:Sound and what you pay for

More in the Canadian guides for food businesses.