Originally Posted by mreed911

Expedia has to pay Canadian sales tax (GST/PST or HST) on at least part of the transaction, since they manage the hotel booking. Depending on how the accounting is done (whether the airfare TRANSACTION is written through by Expedia or simply handed off to the airline), it's entirely possible that the it will pay the same taxes on it. I don't know enough about how their internal accounting methods work to know either way.

Now, whether there's a net positive tax gain is likely up for debate, but I'd say probably so, since there's no corresponding tax "rebate" on a voucher. Remember, Expedia can't take a LOSS on this - they didn't resell the travel for less than cost - they subsidized the cost with a voucher - a VERY different financial transaction from an actual loss. Even if that subsidy causes a net loss, you MUST still account for the profit on the transaction itself, then as a separate line item account for the cost of the vouchers (hence the separate line items on credit cards) according to GAAP standards. That alone "positively" affects the taxes Expedia.ca is liable for, and quite possibly the US airlines since the transaction was BOOKED through a Canadian company (even if the charge itself issues from a US company).