I was in line behind someone at a Walgreens today and the were buying Amazon gift cards. The total rang up with some odd cents at the end. My assumption was that he was charged sales tax on them as I can’t imagine people buying gift cards is really odd amounts. But I assume that when the recipient uses them on Amazon, they are also charge sales tax. This seems a bit unfair. Does anyone know if the sales of gift cards should be taxed. Yes I realize this may vary from state to state.
I’m Canadian, but up here you buy gift cards for the cash value and the tax is applied at time of sale so a $100 gift card costs $100 and will buy you between $88.50 and $100 worth of stuff on redemption depending on applied taxes.
What state are you in? That may help illuminate things.
Some cards have activation fees, and that could account for “odd amounts” too.
I live in CT, but I was actually asking a more general question if the answer is known.
Some googling leads me to various web sites that say, “generally, gift cards are not taxed at the time of purchase in most states.” And, this cite from the Connecticut Department of Revenue Services suggests that they are not taxed in that state (though it’s an old law, which specifies “gift certificates,” as it predates the modern gift card).
I didn’t, with a few minutes of searching, find a site that shows which, if any, U.S. states currently tax the purchase of gift cards.
I might suspect it’s more likely that, as @Broomstick notes, that the gift cards you saw being purchased have activation fees – IME, that’s not uncommon, particularly on “general use” gift cards from Visa or Mastercard, as opposed to retailer-specific cards. It looks like Amazon does not charge an activation fee for their cards, so I’m a little stumped at what you saw (unless possibly one of the cards being purchased was not an Amazon card).
Of course, to state the obvious, it’s also possible that the person bought something else besides gift cards, and you just didn’t notice.
It’s also possible that they bought cards in weird amounts. Many gift cards will let you put whatever amount you want on them, and while people usually choose round numbers, I can see someone getting one in a non-round amount for a variety of reasons (for instance, they’re getting it for someone to buy a specific item and matching that price, or the cents figure is a number of special significance to those two people).
I know nothing else was purchased as he put a stack of ten gift cards on the counter and nothing else. I was a touch upset when the clerk didn’t indicate multiples and do one scan but had to scan each one then enter something into the register. I don’t think the purchaser asked for odd amounts as he said nothing to the cashier and though I didn’t see every card the ones I did see all said $25 on them.
I was trying to figure out if I should complain to the store. Maybe I’ll buy myself one for $25 and see if they try to charge me tax. If the do I’ll ask to see the manager.
That was, very likely, the clerk having to go through the process of activating each card separately. When I’ve bought gift cards at stores, that’s part of the scanning/sales process – until they’re activated at the register, by the clerk, gift cards don’t work.
Depending on the chain, but that’s likely something the store has zero control over. Any taxation is set in the system, not controlled at the store level.
I’m pretty sure it wasn’t tax, but activation fees. Some bank gift cards like prepaid Mastercard and Visa have a fee, IIRC $3.95. Per card.
I’m not aware of tax being charged on purchase of the card.
Which I would totally agree with, except that the OP has said that they were Amazon cards, and as far as I can tell, Amazon gift cards do not have activation fees.
Correct, each card has to be individually activated. Otherwise, how would the system know which ten cards you just put $20 each on?
More importantly: otherwise, racks of gift cards would be an amazingly attractive target for shoplifters, because they would essentially be free money sitting out there on a rack.
I doubt if sales tax is charged on gift cards anywhere since they are basically a cash equivalent. But I wonder if Walgreen’s charges a fee for non-Walgreens gift cards.
I do not know of any state where sales tax is assessed on gift cards.
I don’t have a cite except that I have implemented Point of Sales systems in every state, except four.
I suppose that would have to be the implementation - usable cards sitting on the rack. I was l looking at it from buying loads money. Ok, but which cards?
The OP answered that upthread:
You’d think there would be a way to scan them in to get them activated rather than requiring the cashier to type in a number subject to typos. I suppose the cashier was typing in her ID number to verify who was doing it.
That only says what type, not which specific cards. There are 500 cards on the rack and you buy 10. Which ten?
The scam is almost the opposite of this - steal unactivated gift cards, scrape off the security covering, note the numbers down, re-cover, and return them to the rack. The crooks periodically check to see if the card has been activated by a purchaser and then drains the card value before it cab used by the legitimate user.