Using points after transition - Canada and taxes

I have a question regarding how taxes will be handled for points cards I redeem after the transition away from MS points.

According to the faq, when I redeem a points card, Microsoft will convert it to cash and retire the points. 

As for taxes though, it says:

"We will not apply taxes when you purchase content using currency that we add to your account at the time of the transition. However, when you use currency that you add to your account after the transition (including from Xbox Gift Cards), all appropriate taxes will be applied to those purchases. "

So my question is:  If I redeem a points card after the transition, and then purchase something, does this mean I get taxed on subsequent purchases (ie. is that MS adding to my account, or me?) 

I don't generally like having lots of points in my account (in case it gets hacked), however I have several points cards I've been sitting on and am trying to decide if I should enter them in now or later.

Thanks!

 

Question Info


Last updated July 4, 2018 Views 36 Applies to:

Hi GoQbert,

Great question! So to clarify, if you have points on your account, and they are transitioned to currency because of the overall transition, those will not be taxed. If you redeem a points code after the transition, those will be taxed

That being said, I would redeem those codes as soon as possible. That way you can get them on your account before the transition, and therefore will not be taxed. 

Again great question. Probably the best one I've gotten all day. :D 

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Thanks for the reply.  

This did answer my initial question, however it has brought up another issue as the transfer happened today.

Prepaid points cards where you tear off the tab are already taxed in Canada.  The ones that are validated at the cash are not (they are considered gift cards).  As all of mine are of the tear-off variety, so this means there is double-taxation occurring on these.  That doesn't seem correct.

Unfortunately I went to enter them all in this morning and discovered I am one day too late, but I certainly do not want to be paying 26% tax (2 x 13%) on purchases.  I have to assume there a distinction made between the 2 kinds of codes.  Is this correct?

Thanks again.

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Howdy Go,

From our Points converting to Currency FAQ:


[quote]When you next redeem a Points card or code, those Points will be retired, and your account will begin using your local currency instead.

Microsoft Points cards and codes that you have purchased and choose to redeem after your account has transitioned will expire one year from the date the Points are redeemed.

Applies to US/Canada only: we will not apply taxes when you spend the currency that we add to your account at the time you redeem your Microsoft Points Card or code.[/quote]


The codes that you input (if I'm understanding correctly what the tab cards are) will then be converted to currency by us and put into your account. Since you already paid taxes on those codes at the retailer you will not be charged tax on them when you purchase content on the marketplace (using that currency).


I hope that clears that up for you and if you have further questions that aren't addressed in the FAQ I linked, please feel free to let us know and we'll be happy to help. 

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Thanks for the reply.

Doesn't this contradict the reply above though (from Mister Ohnaka)?

So just to be clear, in the FAQ it says:

"We will not apply taxes when you purchase content using currency that we add to your account at the time of the transition"

The "transition" referred to is not the one that happened this morning, but rather the conversion that occurs whenever you redeem an existing points card. The dashboard message does say taxes apply, but I'm assuming this is a generic message.

So essentially you are saying purchase made via cash converted by a points card are not taxed in Canada.  Tax only applies to amounts added using the gift cards that will be available later in the year, or if I use my credit card.  

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[quote user="GoQbert"]

So essentially you are saying purchase made via cash converted by a points card are not taxed in Canada.  Tax only applies to amounts added using the gift cards that will be available later in the year, or if I use my credit card.  

[/quote]

Correct. : ) Sorry about the confusion! 

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