Gift cards and customer deposits: when to record revenue and GST/HST
Receiving money does not always mean earning revenue. Understand gift-card tax timing, check deposits separately and track what you still owe customers.
A customer buys a $100 gift card on December 20. Has the business earned $100 in revenue? In simple bookkeeping terms, not yet. It has received money for goods or services it still owes the customer. This is similar to collecting a deposit for a future order. But gift cards and deposits are different arrangements and may have different contract terms.
Myth: selling the card is the taxable event
For goods and services tax or harmonized sales tax (GST/HST), the Canada Revenue Agency (CRA) has a specific policy on gift certificates. Selling the certificate itself is not a supply subject to GST/HST. The tax applies when it is used for actual goods or services. Do not use the card's sale date as the tax date.
This answers the tax-timing question, not every accounting question. The liability is what the business still owes the customer. How to record it, and any “breakage” from cards sold but never used, depends on the accounting rules and policies the business follows. This article does not cover those choices. Confirm the treatment with an accountant. The GST/HST rule alone does not settle it.
Myth: every customer deposit follows the gift-card rule
A gift card has its own CRA policy. A customer deposit is a separate case. For example, a customer may pay half upfront for custom work due in two months. The GST/HST treatment and when to record revenue can depend on what was promised, the dates and the contract terms. Do not apply the gift-certificate rule to every advance payment. Check the guidance for the particular kind of deposit.
Tracking what is still owed, not just what was collected
Whatever the accounting treatment, keep track of what you still owe customers for cards and deposits. Tracking only cash received can make those obligations look smaller than they are. A card sold in December and redeemed the following July remains an obligation for those seven months. It is not forgotten revenue sitting in the bank.
Bookwits can keep a task or reminder to review old unused cards or deposits with a colleague or client. It is not a ledger, the main accounting record, and does not track account balances. Keep the actual amount owed and its GST/HST and financial-statement treatment in the accounting records. Have the responsible accountant or bookkeeper review them.
A quick reference before closing the books on a card or deposit
| Question | Why it matters |
|---|---|
| Has the card or deposit actually been redeemed, expired under its own terms, or refunded? | Only one of those events closes the obligation; simply growing older does not. |
| Has GST/HST been accounted for at redemption, not at the original sale? | Charging or tracking tax at the wrong date misstates the period's return. |
| Is the outstanding balance still visible somewhere, not just the original cash receipt? | A forgotten balance understates what the business still owes customers. |
Frequently asked questions
Does GST/HST apply when a business sells a gift card?
Generally no, according to the Canada Revenue Agency’s policy on gift certificates — the sale itself is treated as not being a taxable supply. GST/HST applies when the card is redeemed.
Do unredeemed gift cards eventually just become revenue?
That depends on the business’s accounting framework and policy for handling unredeemed balances, which is a separate question from the GST/HST timing rule. Confirm the specific treatment with an accountant rather than assuming one universal answer.