Laws, Ordinances & Regulations

How Long do Gift Cards Last?

Buying gift cards has some appeal, as a way to help out local businesses. Buy it now- giving the business some much needed cash, redeem later when business is better. What about using an existing gift certificate?

Does putting off redeeming a gift card actually benefit the business? It depends on the state, and how long you want to put off using the gift card.

When a gift card is purchased, the business gains cash and marks an IOU down on its ledgers, more or less. For a business, Cash is good, and an IOU that’s never redeemed would seem like a good thing.

This is where the government comes in. If a gift card sits around long enough, unused, it starts to run afoul of unclaimed property laws. Many states require that unclaimed property be transferred to the state, a process known as escheatment. This isn’t, as it happens, an issue for the chap with the gift card sitting under a pile of papers. It’s an issue for the business.

Businesses keep track of gift cards sold, and redeemed. In some states, the profit from an unredeemed gift card must be given to the state, so the business doesn’t profit from the sale. Instead of the customer getting value back, the customer has essentially made a donation to the state government, which the business has been required to keep track of for a while.

What about in Montana? In Montana, gift cards don’t expire. That doesn’t mean the state government doesn’t get involved though- after three years, it’s abandoned property, and the state would like the funds. Not all the funds- depending on the type of gift card, the state of Montana may only want 60% of the value. And for businesses that don’t make very much from gift cards (less than $200,000 in the past year), the gift card won’t be considered abandoned.

So- in short, even in Montana, whether putting off using a gift card for more than three years is a benefit to the business depends on how many gift cards the business sells. For your small town business, putting off using a gift card probably won’t leave them writing a larger check for their state taxes.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s