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Text-Focused Approach Endorsed By SCC

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Whether a supply is taxable under the Excise Tax Act (“ETA”) can depend, in part, on how that supply is characterized. In normal commercial relations, businesses will often bundle many diverse services together – including both taxable and exempt services. Once bundled together, one must consider whether they remain multiple supplies, or whether they now constitute one single supply. If a single supply, one must then determine the character of that supply, which can impact whether it is taxable or exempt.

The courts’ approach to characterizing bundled supplies has evolved over the last few years. This was especially apparent in last year’s Federal Court of Canada (“FCA”) decision in Canadian Imperial Bank of Commerce v. Canada, 2021 FCA 96 (“CIBC 2021”), which was recently denied leave to appeal to the Supreme Court of Canada (“SCC”) — making it the law of the land.

The recent Tax Court of Canada (“TCC”) decision in Canadian Imperial Bank of Commerce v. The Queen, 2022 TCC 83 (“CIBC 2022”), is an example of how the TCC is now applying the FCA’s text-focused approach to other GST/HST characterization cases.


In CIBC 2021, the dispute involved competing characterizations of credit-card-related supplies made by Aeroplan to CIBC. Both CIBC and the government agreed there was a single supply, but they disagreed over its characterization. CIBC argued it paid Aeroplan to issue Air Miles to its customers, and that the Air Miles were “gift certificates” on which CIBC did not have to pay tax. However, the TCC held that CIBC was the recipient of a taxable “promotional and marketing” service from Aeroplan.

On appeal, the majority of the FCA upheld the TCC decision. The majority’s reasons placed particular weight on the text of the agreements, and viewed CIBC as asking the court to “rewrite” parts of the agreement.

In contrast, the dissent focused on the commercial efficacy – or the practical effects of the supply – and would have granted CIBC’s appeal.

Since the SCC has refused leave to appeal, the majority’s text-focused approach is currently the law of the land.

The CIBC 2022 Decision

CIBC 2022 involved a supply made by President’s Choice Bank (“PC”) to CIBC under two separate written agreements for the promotion of certain financial products and access to a consumer loyalty program.

Both CIBC and the government agreed there was a “single compound supply”. The issue was whether that single supply was an exempt “financial service”, or whether it fell within an exclusionary paragraph and was therefore a taxable supply.

The TCC appeared to apply the approach from CIBC 2021, stating in part that “the agreements between the parties play a dominant role in determining what was supplied” (para. 48) (emphasis ours). Based on those agreements, the TCC held that CIBC was the recipient of a taxable supply of property.


The court’s focus on the text of the agreements is significant for businesses which have complex relationships and bundled services – and particularly those who make supplies to financial institutions, doctors, or other industries who make exempt supplies and are therefore not entitled to fully offsetting Input Tax Credits (“ITCs”).  

As these cases demonstrate, parties ought to pay careful attention to the characterization of the underlying supplies in their written agreements, because the courts are focused on those agreements in their decisions.

In some cases, it may be advisable to break out separate supplies into separate agreements rather than “bundling” them for a single amount of consideration. Where multiple supplies are bundled, the parties should consider expressing their views as to the substance of the supply. Those looking to engage in these sorts of complex “bundles” of supplies – or looking to renew older commercial contracts – should seek professional advice.

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