CRA finds that card payment processing services paid by a merchant under an agreement with an ISO and credit card company were for exempt financial services

A merchant operating a convenience store entered into an agreement (the “Service Agreement”) with an independent sales organization (ISO) and an “acquirer” for the purpose of acquiring card payment processing services of the acquirer. The merchant also entered into an agreement (the "Device Agreement") with DeviceCo for the provision of point-of-sale mechanisms and/or devices, together with associated software, maintenance, and connectivity.

The CRA indicated that the monthly equipment rental fees paid by the merchant to DeviceCo were consideration for taxable supplies by DeviceCo. However, the fees paid by the merchant under the Service Agreement were regarded as consideration for the processing of credit and debit card payments within the payments network and, thus, as consideration for exempt supplies of financial services.

Neal Armstrong. Summary of 13 December 2024 GST/HST Ruling 247852 under ETA s. 123(1) – financial service – para. (i).