# Tax on gift cards **URL:** \ **Category:** Factual Questions\ **Created:** [December 15, 2024, 10:35pm UTC](https://boards.straightdope.com/t/tax-on-gift-cards/1011687 "2024-12-15T22:35:16Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![kenobi\_65](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kenobi_65/32/13178_2.png) [@kenobi\_65](https://boards.straightdope.com/u/kenobi_65)\ **Post date:** [December 16, 2024, 2:25am UTC](https://boards.straightdope.com/t/tax-on-gift-cards/1011687/21 "2024-12-16T02:25:01Z")
> [@Irishman](#): > > That only says what type, not which _specific_ cards. There are 500 cards on the rack and you buy 10. Which ten? The ten that got scanned when the guy brought them to the cashier (each of which has a unique ID number). I’m not sure what you’re asking? ---
**Author:** ![leswax](https://avatars.discourse-cdn.com/v4/letter/l/85f322/32.png) [@leswax](https://boards.straightdope.com/u/leswax)\ **Post date:** [December 16, 2024, 2:38am UTC](https://boards.straightdope.com/t/tax-on-gift-cards/1011687/22 "2024-12-16T02:38:09Z")
Do you have a cite for this happening? It sounds like a nice scam but I’ve had to thoroughly destroy my gift cards’ packaging before scraping the code off to use it online. ---
**Author:** ![Mighty\_Mouse](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mighty_mouse/32/7776_2.png) [@Mighty\_Mouse](https://boards.straightdope.com/u/Mighty_Mouse)\ **Post date:** [December 16, 2024, 2:39am UTC](https://boards.straightdope.com/t/tax-on-gift-cards/1011687/23 "2024-12-16T02:39:59Z")
It’s a big problem right now. > **[Why You Should Avoid Buying A Gift Card From The Display Rack At The Store](https://www.huffpost.com/entry/gift-card-scam-ano_l_675c8747e4b01e3eb18e5e81/amp)** > > It's safer to buy gift cards online or from behind a counter. Experts explain why. ---
**Author:** ![FinsToTheLeft](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/finstotheleft/32/2930_2.png) [@FinsToTheLeft](https://boards.straightdope.com/u/FinsToTheLeft)\ **Post date:** [December 16, 2024, 3:26am UTC](https://boards.straightdope.com/t/tax-on-gift-cards/1011687/24 "2024-12-16T03:26:46Z")
> [@leswax](#): > > Do you have a cite for this happening? Here’s one from a few weeks ago: > **[Ontario woman tries to use Visa prepaid gift card, realizes she had been scammed](https://toronto.ctvnews.ca/ontario-woman-tries-to-use-visa-prepaid-gift-card-realizes-she-had-been-scammed-1.7131154)** > > An Ontario woman was 'shocked' to find out her unused $250 gift card was almost completely drained. 'My aunt gave me this gift card as a present and I was shocked to find out it was almost empty,' Catherine Uchida, of Mississauga, told CTV News... ---
**Author:** ![leswax](https://avatars.discourse-cdn.com/v4/letter/l/85f322/32.png) [@leswax](https://boards.straightdope.com/u/leswax)\ **Post date:** [December 16, 2024, 3:56am UTC](https://boards.straightdope.com/t/tax-on-gift-cards/1011687/25 "2024-12-16T03:56:52Z")
Appreciate the cites, ignorance fought. > [@Mighty\_Mouse](#): > > It’s a big problem right now. This explains why the gift cards at the grocery store are on the front end caps in view of the cashiers. > [@FinsToTheLeft](#): > > Here’s one from a few weeks ago That’s an interesting case because it’s not what I think of as a “gift card” but a prepaid credit card which cost $5.95 and had a balance added to it. It seems like the victim of the scam may have a stronger legal hand for recourse in this case. ---
**Author:** ![needscoffee](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/needscoffee/32/1076_2.png) [@needscoffee](https://boards.straightdope.com/u/needscoffee)\ **Post date:** [December 16, 2024, 4:05am UTC](https://boards.straightdope.com/t/tax-on-gift-cards/1011687/26 "2024-12-16T04:05:13Z")
> [@OldGuy](#): > > 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 I occasionally buy and activate Amazon cards in the self-checkout lane. I never key in numbers. It gets read automatically. ---
**Author:** ![Irishman](https://avatars.discourse-cdn.com/v4/letter/i/b487fb/32.png) [@Irishman](https://boards.straightdope.com/u/Irishman)\ **Post date:** [December 16, 2024, 6:04am UTC](https://boards.straightdope.com/t/tax-on-gift-cards/1011687/27 "2024-12-16T06:04:18Z")
> [@kenobi\_65](#): > > The ten that got scanned when the guy brought them to the cashier (each of which has a unique ID number). I’m not sure what you’re asking? Right. That’s how it _is_ done. This conversation has gone on a circle. The question was why they had to scan each card, not use the quantity key like with bananas or cans of vegetables. I proposed that if you just scanned one card, the banks would not know which ten cards were active. You said if the cards were already active and just had to be purchased, they would be free money. I responded that I had assumed they were not already active, and used the rhetorical question to illustrate. Are we caught up now? ---
**Author:** ![Irishman](https://avatars.discourse-cdn.com/v4/letter/i/b487fb/32.png) [@Irishman](https://boards.straightdope.com/u/Irishman)\ **Post date:** [December 16, 2024, 6:13am UTC](https://boards.straightdope.com/t/tax-on-gift-cards/1011687/28 "2024-12-16T06:13:22Z")
> [@leswax](#): > > Do you have a cite for this happening? When I worked service desk, I got a call from someone claiming to be our bank card servicer. He said they were deactivating some cards, he would come in and pick them up at some point, but he wanted me to read off the barcodes from a whole stack of them, over the phone. Um, yeah, red alert, red alert. Besides, I didn’t have time to process a a couple dozen cards standing on the phone. If he were legit, he would either have me pull all the cards or works come on himself to do that. Recently we did get a scam alert about the prepaid cards and pulled them all off the kiosk. To buy one, you had to ask at the service desk. That has been cleared, but it was definitely part of some theft protection. ---
**Author:** ![Cervaise](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cervaise/32/16693_2.png) [@Cervaise](https://boards.straightdope.com/u/Cervaise)\ **Post date:** [December 16, 2024, 6:48am UTC](https://boards.straightdope.com/t/tax-on-gift-cards/1011687/29 "2024-12-16T06:48:07Z")
For what it’s worth, (mumble mumble) years ago I was an analyst at a brick-and-mortar retailer that was joining the modern world by replacing its creaky obsolete website with a modern e-commerce platform. The user-facing front end being installed was up-to-date, but it had to interact with the legacy mainframe back end that, in part, managed inventory. And we discovered, when we tried to add gift card purchase to the website, that the back end didn’t know gift cards were non-taxable. It assumed every transaction was a hard-goods sale; there was no category that could be leveraged to process the cards (either “cash equivalent,” so no tax, or “no inventory,” so the mainframe would ignore it). As a result, every shopping cart that was passed from the website including a gift card was being rejected. So we had to pause the gift card implementation until we could scrounge up a COBOL programmer to kludge in a patch. And we discovered in the process that the equally ancient point-of-sale system already had a “no inventory” kludge so gift cards could be purchased in-store without borking the mainframe, and it had been done so long ago that nobody remembered it. Bottom line: gift cards are broadly non-taxable, and whatever this little add-on fee is, it has to be something else, as others have described. (Technology is fun!) ---
**Author:** ![Broomstick](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/broomstick/32/246_2.png) [@Broomstick](https://boards.straightdope.com/u/Broomstick)\ **Post date:** [December 16, 2024, 10:22am UTC](https://boards.straightdope.com/t/tax-on-gift-cards/1011687/30 "2024-12-16T10:22:04Z")
> [@OldGuy](#): > > 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. Gift cards have to be individually activated. The ones where you set the amount require that amount to be put into the register. You can’t do these in batches. Some stores require the cashier to do other things, like acknowledge this is not an over-the-phone transaction (as an example). A $25 card that also has an activation fee is only going to say “$25” on the card, it won’t mention the additional fee. > [@FinsToTheLeft](#): > > 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. > [@leswax](#): > > Do you have a cite for this happening? It sounds like a nice scam but I’ve had to thoroughly destroy my gift cards’ packaging before scraping the code off to use it online. My cite is occasionally trying to activate a card only for the register to say it’s already been activated, or noting signs of tampering. It’s a bit of an arms race, but remember that the thieves do this for a living. They can be damned clever at getting into the packaging and reclosing it. ---
**Author:** ![md-2000](https://avatars.discourse-cdn.com/v4/letter/m/9d8465/32.png) [@md-2000](https://boards.straightdope.com/u/md-2000)\ **Post date:** [December 16, 2024, 1:30pm UTC](https://boards.straightdope.com/t/tax-on-gift-cards/1011687/31 "2024-12-16T13:30:01Z")
There was a news item / alert once about some lady who got a gift card for a decent amount (about $250 IIRC). She mentioned it in a chat online (Facebook?) and posted a picture. Someone apparently asked her “what does the back of the card look like?” and she posted a picture of that. When she went to use it, it had been drained. It would make no sense to charge tax on a gift card, because it could be used to purchase items that are tax-exempt, or can be used in another jurisdiction - so either taxing non-taxable items, or double-taxing. (Presumably there’s nothing in the Point-of-sale when you buy a product later, to say “It’s a gift card not cash, tax has already been collected”) ---
**Author:** ![Irishman](https://avatars.discourse-cdn.com/v4/letter/i/b487fb/32.png) [@Irishman](https://boards.straightdope.com/u/Irishman)\ **Post date:** [December 16, 2024, 2:33pm UTC](https://boards.straightdope.com/t/tax-on-gift-cards/1011687/32 "2024-12-16T14:33:04Z")
> [@md-2000](#): > > It would make no sense to charge tax on a gift card, because it could be used to purchase items that are tax-exempt, or can be used in another jurisdiction - so either taxing non-taxable items, or double-taxing. Well, it _could_ make sense to tax them. The purchaser is burying an object. Tax that purchase transaction. The user has separate transactions later that are taxed appropriately then. Society has decided that feels like double taxation. It’s also an incentive for businesses to sell cards and not tax the customer, as it encourages use of gift cards. Socially, we have reasons to not tax gift card purchases, but it can be argued logically they should be taxed. ---
**Author:** ![Railer13](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/railer13/32/9742_2.png) [@Railer13](https://boards.straightdope.com/u/Railer13)\ **Post date:** [December 16, 2024, 3:00pm UTC](https://boards.straightdope.com/t/tax-on-gift-cards/1011687/33 "2024-12-16T15:00:40Z")
> [@Irishman](#): > > Society has decided that feels like double taxation. That’s because it is double taxation. I could give you fifty bucks in cash, which you then use to buy stuff at Target. You are charged tax on your purchases. Or I could buy and then give you a fifty-dollar Target gift card, which you then use to buy stuff at Target. You are charged tax on your purchases. If I am charged tax on the gift card purchase, it’s double taxation. ---
**Author:** ![Irishman](https://avatars.discourse-cdn.com/v4/letter/i/b487fb/32.png) [@Irishman](https://boards.straightdope.com/u/Irishman)\ **Post date:** [December 16, 2024, 3:07pm UTC](https://boards.straightdope.com/t/tax-on-gift-cards/1011687/34 "2024-12-16T15:07:55Z")
If you give me cash, there was no purchase involved. If you buy a gift card to give to me, that is a purchase separate from what I buy with the gift card. If purchases are taxed, that’s a separate purchase. ---
**Author:** ![Broomstick](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/broomstick/32/246_2.png) [@Broomstick](https://boards.straightdope.com/u/Broomstick)\ **Post date:** [December 16, 2024, 3:18pm UTC](https://boards.straightdope.com/t/tax-on-gift-cards/1011687/35 "2024-12-16T15:18:04Z")
Not all purchases are taxed. Which ones are or aren’t varies by jurisdiction. ---
**Author:** ![CookingWithGas](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cookingwithgas/32/485_2.png) [@CookingWithGas](https://boards.straightdope.com/u/CookingWithGas)\ **Post date:** [December 16, 2024, 4:17pm UTC](https://boards.straightdope.com/t/tax-on-gift-cards/1011687/36 "2024-12-16T16:17:23Z")
Another possibility is that Walgreens in your state discounts the Amazon gift cards. I have never bought one in a store so I have don’t have the facts on this, but some retail stores might discount the gift cards as a loss leader. I doubt that Walgreens is paying $20 to Amazon for a $20 gift card. Costco even discounts postage stamps, the only place I have seen that. ---
**Author:** ![Mighty\_Mouse](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mighty_mouse/32/7776_2.png) [@Mighty\_Mouse](https://boards.straightdope.com/u/Mighty_Mouse)\ **Post date:** [December 16, 2024, 4:59pm UTC](https://boards.straightdope.com/t/tax-on-gift-cards/1011687/37 "2024-12-16T16:59:04Z")
> [@CookingWithGas](#): > > I doubt that Walgreens is paying $20 to Amazon for a $20 gift card. I bet it is a lot closer to $20 than you think. They probably aren’t dealing directly with Amazon, but with Blackhawk (the Ticketmaster of gift card activation). The more popular the gift card is, the less commission it pays the intermediaries. Applebee’s gift cards probably pay a lot, because they are bringing customers into Applebee’s. Amazon doesn’t believe their gift cards result in any more sales. I wouldn’t be surprised if Amazon starts charging a fee for their gift cards, like Visa and Amex. ---
**Author:** ![Irishman](https://avatars.discourse-cdn.com/v4/letter/i/b487fb/32.png) [@Irishman](https://boards.straightdope.com/u/Irishman)\ **Post date:** [December 16, 2024, 7:48pm UTC](https://boards.straightdope.com/t/tax-on-gift-cards/1011687/38 "2024-12-16T19:48:36Z")
How it works for Walmart, and I assume for Walgreens, we have a third party vendor that brings them in and stocks them. They are “pay to scan”, which means Walmart doesn’t pay anything to bring them in and doesn’t count them for inventory. We get a percentage from each sale. If the cards are stolen or thrown away, it doesn’t cost us anything. I don’t know what the percentages are, but wouldn’t be surprised if they are small. ---
**Author:** ![md-2000](https://avatars.discourse-cdn.com/v4/letter/m/9d8465/32.png) [@md-2000](https://boards.straightdope.com/u/md-2000)\ **Post date:** [December 16, 2024, 9:01pm UTC](https://boards.straightdope.com/t/tax-on-gift-cards/1011687/39 "2024-12-16T21:01:01Z")
> [@Irishman](#): > > If you give me cash, there was no purchase involved. If you buy a gift card to give to me, that is a purchase separate from what I buy with the gift card. If purchases are taxed, that’s a separate purchase. But then technically you are exchanging one purchased item for another, not doing a finaicial transaction. ---
**Author:** ![Irishman](https://avatars.discourse-cdn.com/v4/letter/i/b487fb/32.png) [@Irishman](https://boards.straightdope.com/u/Irishman)\ **Post date:** [December 16, 2024, 10:49pm UTC](https://boards.straightdope.com/t/tax-on-gift-cards/1011687/40 "2024-12-16T22:49:33Z")
Financial transactions can cost money. [Previous page](https://boards.straightdope.com/t/tax-on-gift-cards/1011687.md?page=1)