posted on January 7, 2009 03:02:23 AM
I have recently read articles and heard about retailers hoping for strong sales from Gift Cards for January. The irony in this is that the retailers have already received the money from the purchase of a gift card... they just want their inventory gone.
Apparently, when a business sells a Gift Card, they don't claim the money received as income until the Gift Card is redeemed. Obviously, that seems backwards considering that oftentimes Gift Cards go unredeemed or partially redeemed and never used again. So, the business keeps the money, but never claim it to the IRS as income.
I first discovered this last year, and immediately asked our accountant who confirmed it. I have been selling gift cards in our store and now only count the monies received when someone redeems the gift card.
I understand now why businesses are pushing Gift Cards so much... as it is oftentimes free money for them. I have also seen an increase in the number of Gift Cards sold at a discount (generally between 10-25% off during November and December that cannot be redeemed until January). Examples have been Sports Authority that sells $25 gift cards with a $5.00 bonus, but couldn't be used until the following.
It seems this is such a huge loophole in accounting and income received. Maybe someone else has a different perspective.
[ edited by shagmidmod on Jan 7, 2009 03:06 AM ]
posted on January 8, 2009 07:28:00 PM
There was someone on ebay Want It Now not too long ago that was actually looking for used LINT from a dryer for a college project...seems it is used to add bulk to make recycled paper!
posted on January 8, 2009 11:04:33 PM
I looked into selling gift cards and there is a catch for the retailer. Most states have giftcard laws now. Some states require the moneys from unclaimed cards to be turned over to the state treasury after a period of time, usually 2 to 3 years. There are also restrictions on the retailer placing limitations on the cards such as expiration dates or lack of activity fees. You might want to look into the gift card laws for your state.
the odds of getting caught for skirting the law are slim but all it takes is one disgruntled customer.
