Taxing Gift Cards

[coeceo.livejournal.com]

Not specific to Davis obviously, but thought I could find some interesting opinions. I recently went to buy a gift card online, and noticed they were charging me 5% MA sales tax. That makes sense for any other purchase because the vender did have MA stores, however it seems odd to charge for a gift card right?

I'm fairly certain that everytime I've used a giftcard, I have also paid sales tax on the item purchased, so that means if you pay tax on a gift card, then pay tax again on the item you buy with that gift card, you are paying taxes twice for the same money....

Do all stores charge tax on gift cards? Does this make sense? It doesn't to me.

Comments

[ron_newman]

Which online store were you trying to buy it from?

Sounds wrong to me, too. (Also, MA sales tax is now 6.25%)

[surrealestate.livejournal.com]

I don't recall paying sales tax when purchasing a gift card, for exactly the reason you state.

This post does remind me that I should post about selling my gift cards, though. Good time for it, I suppose.

[svilletheatre.livejournal.com]

We don't add tax for our gift card sales; some of the things they are redeemed for are taxable (food/beverage) and some are not (tickets.) Can't speak to the nature of online sales though. I personally don't recall ever paying a tax on a gift certificate in my life!

[belladonna.livejournal.com]

Yeah, something sounds off there. I've never paid sales tax on a gift card and, like Ron said, it's not even the correct sales tax for MA.

[vonelftinhaus.livejournal.com]

does not seem right-I would look into this further.

[slinkr.livejournal.com]

I've never seen tax on a gift card purchase. If you were buying online, it could be a bug in their online store.

[autumnsshadow.livejournal.com]

I don't know about other states, but I've had direct experience through my job with Massachusetts tax law requirements surrounding internet purchases. Massachusetts requires that you pay state tax on anything considered to be "tangible personal property" with a list of exemptions you can find here: Tax Exempt Items (http://www.mass.gov/?pageID=dorterminal&L=6&L0=Home&L1=Individuals+and+Families&L2=Personal+Income+Tax&L3=Forms+%26+Publications&L4=Publications&L5=Publications+Index&sid=Ador&b=terminalcontent&f=dor_publ_sales_use&csid=Ador#exempt) Sales of gift certificates/cards are specifically addressed in a letter ruling(Letter Ruling 81-4 (http://www.mass.gov/?pageID=dorterminal&L=8&L0=Home&L1=Businesses&L2=Help+%26+Resources&L3=Legal+Library&L4=Letter+Rulings&L5=Letter+Rulings+-+By+Year(s)&L6=1984+and+Prior&L7=1981+Rulings&sid=Ador&b=terminalcontent&f=dor_rul_reg_lr_lr_81_4&csid=Ador)) and ruled nontaxable based on the definition in MGL Chapter 64H, Section 1(15) that specifically excludes "rights and credits" and goes on to cover that the sales tax will be paid on the goods you purchase with the certificate. The same rules apply to purchases from the internet. For instance, if you purchase software that you download, Massachusetts doesn't require you pay a tax on it because it isn't considered a tangible good. If you get the same software shipped to you on a disk, you would have to pay the sales tax. Even though you are getting a tangible gift card, it isn't considered a tangible good.

Long explanation short: There is no reason for you to be charged Mass sales tax for the gift certificate, even on the basis that they have stores in Mass. It sounds like either a poorly designed checkout interface or someone is trying to take advantage of people not picking up on it...keeping in mind, of course, that I don't necessarily know the state tax law for the state from which you are receiving said card, but can't see any reason they would require charging Mass state sales tax.

[coeceo.livejournal.com]

Nice input, slinkr is right on this one.

I was purchasing the card for a gift from Urban Outfitters, after contacting customer service they assured me it is an estimate applied during the checkout process but would not be charged upon final checkout (aka, if I had clicked NEXT it would have disappeared).

It could also be that they pocket it.

[nvidia99999.livejournal.com]

Being the cynical bastard I am :)

[tt02144.livejournal.com]

I've never heard of this. I believe that Massachusetts is one of the states (so far) that don't require that you pay sales tax for online purchases. Which means you'd be paying a tax unnecessarily if this were for online purchases. Also, clothing is not taxable in Massachusetts, how can you charge a sales tax on something which is not taxable? In fact, how can you charge a sales tax when you haven't yet purchased a tangible item? I think there's something wrong with the store/web site which is doing this.