Gift card, explained
The tax rule is the one shops get wrong first. Under section 181.2 of the Excise Tax Act, as set out in the CRA’s policy statement P-202, selling a gift certificate is deemed not to be a supply, so no GST/HST is charged on the sale; the tax is charged on the haircut or product when the card pays for it. A $50 gift card is $50 at the till, and the $45.99 Montreal cut it later buys is where the GST and QST appear.
Provincial consumer law protects the balance. Ontario’s Consumer Protection Act rules on gift cards ban an expiry date on most retail gift cards, along with activation fees and fees that eat the balance over time; a fee to customize a card or replace a lost one is allowed, and a card sold for one specific service, such as a single hot-towel shave, may carry an expiry date. British Columbia’s Business Practices and Consumer Protection Act (ss. 56.1 and 56.2) does the same, with exceptions for cards for a specific service, charitable cards and promotional cards given for nothing.
The mistake shops make most is selling the card as a service. “Gift card: one fade” is a single-service certificate that can expire and is awkward to redeem when prices change; “gift card: $50” is stored value that spends on anything and never expires. Sell dollars, not haircuts, and the card survives every price change and every new barber.
BarberFlow sells gift cards as stored value from $10 to $500 with a 16-character code, physical for a walk-in at the till or digital by email, and tracks each redemption against the employee who sold the card. The sale rings with no tax and the tax is applied to the services and products the card later pays for, which is the CRA treatment.
See Point of SaleFrequently asked questions
Do I charge HST when I sell a gift card?
No. Section 181.2 of the Excise Tax Act treats the sale of a gift certificate as not a supply, so no GST/HST applies to the sale. The tax is charged on the service or product the card is redeemed for.
Can a barbershop gift card expire?
Not in Ontario or BC for an ordinary stored-value card: expiry dates and balance-reducing fees are banned. A certificate for one specific service, or a promotional card given away free, may carry an expiry date.
Can I charge a fee to replace a lost gift card?
Yes. Ontario allows a fee to replace a lost or stolen card and a fee to customize a card; activation fees and dormancy fees that reduce the balance are banned for ordinary retail cards.
