Gift Cards, Deposits and Money Held in Advance

The thing these have in common

A gift card, a deposit, a prepaid package of sessions, and a retainer are all the same transaction from the customer's side: they have paid, and you have not yet delivered.

Which means the money is theirs in substance until you earn it, whatever your bank balance says.

That framing resolves most of the questions that follow, and it is why the rules are stricter than sellers expect.

Gift cards

Regulated provincially, and the regimes are broadly similar in direction.

The common features across provinces: expiry dates on general-purpose gift cards are restricted or prohibited, fees that erode the balance over time are restricted, and required disclosure has to appear on the card or its packaging.

Exceptions exist in most provinces, commonly for cards for a specific service or a defined group of goods, promotional cards given away rather than sold, and cards for charitable purposes. Those exceptions differ by province, which is exactly why a blanket policy copied from elsewhere causes trouble.

The practical position for a small business: assume a gift card sold for money does not expire and carries no maintenance fee, disclose the terms on the card itself, and confirm the specifics for your province before doing anything else.

The accounting consequence is worth stating too. An unredeemed card is a liability rather than revenue, and treating it as income when sold overstates the year and creates a problem when it is redeemed.

Deposits

Where service businesses are most exposed.

A deposit is taken against future work. Until the work is done or costs are genuinely incurred, it is not yours.

What that means when things change: if the customer cancels, the portion representing work not done and costs not incurred should generally be returned. Retaining an amount to cover genuine loss is defensible; retaining the whole deposit as a penalty frequently is not.

The distinction courts and tribunals tend to draw is between a genuine pre-estimate of loss and a penalty, and a deposit written as non-refundable in all circumstances leans toward the second.

Which argues for writing the term properly: what the deposit covers, what happens on cancellation at different stages, and what is retained and why. A term explaining the reasoning survives scrutiny in a way a flat forfeiture clause does not.

Some provinces also cap deposits or impose requirements for prescribed contract types, so the amount itself is worth confirming rather than choosing by feel.

Prepaid packages of services

Sessions, classes, treatments, hours of consulting, bought in bulk at a discount.

Several provinces regulate prepaid services specifically, particularly around contract length, cancellation rights, and expiry, and some sectors have their own requirements.

The recurring dispute is expiry. A package sold as ten sessions that must be used within three months is a term the customer frequently did not register, and enforcing it against somebody who paid produces a complaint with reasonable grounds.

Workable practice: state any expiry prominently before purchase, make it generous enough to be defensible, and have a stated position on what happens if illness or circumstance intervenes.

What happens if you close

The uncomfortable scenario, and the reason this is a compliance topic rather than a bookkeeping one.

Money taken in advance for goods and services never delivered is a real harm to customers and, in a wind-up, they are generally unsecured creditors who recover little.

A business selling gift cards and prepaid packages is carrying an obligation it may not be able to meet, and the size of that obligation is worth knowing rather than discovering.

Tracking outstanding liability, and not spending prepaid money as though it were revenue, is the practical protection for the business as well as the customer.

What to put in writing

1. Gift card terms on the card, including that it does not expire where that applies.
2. What a deposit covers, and the cancellation position at each stage.
3. Any package expiry, stated before purchase rather than on the receipt.
4. Transferability, since customers ask and assume.
5. What happens to a partial balance, and whether cash back is available.
6. A record of outstanding liability, reviewed rather than assumed.

This is general information rather than legal advice, provincial rules differ meaningfully on exactly these points, and the applicable consumer protection authority is the reference. How the money is staged in the first place is a related decision, covered in deposits and stage payments.

Frequently asked questions

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