Best Buy customers hoping to give the gift of Netflix are paying more than they should — eight per cent more — in the form of provincial sales tax. 

An I-Team investigation found the big box retailer was slapping tax on Netflix gift cards at all three of its Winnipeg stores. The retailer subsequently admitted it charged the tax in its Saskatchewan and B.C. stores too. 

Consumer protection lawyer Jeff Orenstein was anything but chill after hearing about the tacked-on tax.

"I see this as a major problem," said Orenstein, who launched a class action lawsuit against Amazon.com for charging sales tax on groceries that are tax exempt. 

"You are certainly harming the consumer, because they should have paid only for the price of the gift card," the Montreal-based lawyer said. "If they are being charged any more than that, they are losing money." 

Jeff Orenstein

Lawyer Jeff Orenstein from the Consumer Law Group says consumers are needlessly losing money if they are charged tax on gift cards. (CBC)

Best Buy apologized to customers, calling it a mistake. 

"This error has since been corrected and we're eager to resolve the issue for our customers," Best Buy public relations specialist Laura Mitchell said in a written statement. Best Buy will provide a full refund on the PST, she said.

When it comes to gift cards, Manitoba's laws are simple.

"There is no sales tax on any gift card," said a provincial spokesperson."There is no exception for Netflix gift cards." Saskatchewan does not tax Netflix gift cards either. 

But the B.C. government told CBC News the PST applies to Netflix cards because the funds can only be redeemed to stream video. Best Buy disagrees with the B.C. government and stands by its assertion that any tax paid was a mistake. 

"Given the ruling we were provided on these cards, we do still assert that the PST in B.C. was charged in error," said Mitchell.

The big box store said the tax was remitted to provincial coffers.  

Netflix gift cards are generally not taxable, but this does not mean Canadians can binge-watch tax-free. Since it's a streaming service that has no Canadian offices, it's not required to remit taxes to the government — which puts the onus on the subscriber. 

In an email to CBC News, the Canada Revenue Agency said Canadian customers are required "to self-assess and remit the GST/HST."

The tax agency said it does not track the number of Canadians who take it upon themselves to pay the tax.

CBC News contacted Netflix for comment but did not hear back.

Best Buy offers PST refund on Netflix gift cards2:19


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