EBizInsider

Fresh off the holiday season, you probably sold and received gift cards. Last year consumers spent $73 billion on gift cards. Approximately 5-10% of the cards sold are never redeemed. Did you know there are some states with laws that require you to report unused cards and certificates? This raises some questions gift card sellers should be addressing:

1. How do I track gift cards?

A. Each card/certificate should have a unique identifying number.

B. Each card/certificate sold should have a start date or in using a “credit card” certificate, should have a written start date.

C. Each card/certificate should have an expiration date or the words “or as required by law”.

D. If selling different cards/certificates for different promotions, be sure to have a code to identify the card sold for each promotion.

E. Track the certificates that are actually redeemed.

F. Keep a list of outstanding gift certificates.

G. If possible, get the customer name and address purchasing the gift card. Consumers may be reluctant to part with that information, but it is very helpful when the gift card goes unredeemed.

2. How do I stay legal and report unused gift cards?

With the increased number of gift certificates sold over the past several years, state governments are taking notice. Many have established “escheat laws” as it pertains to abandoned property including gift certificates.

In the simplest terms, “escheat” refers to the process through which property that is, or is deemed to be, unclaimed or abandoned becomes property of the state after a certain period of time. All states have escheat laws that, while being similar, are all somewhat different. Each state defines how long property must be unclaimed before it is considered abandoned. Most states have a three to five year period before the gift certificate is considered abandoned. The chart below shows some examples of how the laws differ by state, according to the “National Conference of State Legislatures” website.

With each state looking to increase revenues without increasing taxes, some states have established “Unclaimed Property” reporting where depending on the state, corporations and businesses now are required to file “Unclaimed Property” returns and submit payments for the unclaimed property, which includes unused gift certificates. Most states require that gift certificates carrying a partial amount must also be turned over to the state. Reporting is done on an annual basis.

The penalty for violating the gift certificate law can result in severe penalties, including fines, multiple damages, and attorney fees.

Should you request more information, you can visit the National Conference of State Legislatures at www.ncsl.org. Here you can access each state’s statutes regarding abandoned gift certificates. Learn the laws that apply to coupons where you do business now, that way you will be able to avoid any unwelcome surprises later. eBiz

The list below shows some examples of how the laws differ by state, according to the “National Conference of State Legislatures” website.

California - Gift certificates purchased after 1997 are not subject to escheat. The escheat law does apply to any gift certificate that has an expiration date and that is given in exchange for money or any other thing of value.

Connecticut - Gift Certificates do not escheat to the state.

Pennsylvania - The consideration paid for a gift certificate or gift card which has remained unredeemed for two years or more after its redemption period has expired and for five years or more from the date of issuance if not, redemption is specified.

Utah - A gift certificate greater than $25 that remains unreconsidered for more than five years after issuance is considered abandoned. The amount considered abandoned is the price paid for the certificate itself.

West Virginia Gift certificate, three years after the thirty-first day of December of the year in which the certificate is sold, but if redeemable in merchandise only, the amount abandoned is deemed to be 60 percent of the certificate’s face value.

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By: Patty Sleboda pattys@ebizinsider.com

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