I know a service provider who recently completed (and sold out) a Living Social deal. In that deal, Living Social, via its website, for $50 sells a voucher for a service valued at $100 at retail. Living Social then, after the offering period for the deal ends, remits the $50 to the service provider with the agreement that the service provider will pay back half of that amount ($25) to Living Social for their marketing services. A credit card processing fee of $1 per voucher was also charged to the service provider. In the end, the service provider took in a net of around $24 and Living Social took in a net of $26. The service provider asked me how much GET he needs to pay.
At first, I thought the right outcome to be that the service provider should pay the 4% GET on the $24 he actually received from the transaction. However, a quick email to the DOTAX rules office showed that DOTAX would likely view the entire $50 received by the service provider as taxable gross receipts even though $26 of the $50 was to be immediately paid to Living Social which collected the $50 in the first place through its website. Perhaps Living Social has some clever tax lawyers on their side because they managed to pass on the brunt of the GET to the service provider.
I am not sure I agree with the opinion of the DOTAX rules office. Although the service provider comes into temporary possession of the $50, the service provider is contractually obligated to pay mroe than half of that to Living Social which collected the funds via its website. Perhaps deeper analysis would have led to a diferent answer from DOTAX but right now that email is our best indicator of how DOTAX would view this transaction.