How do I add sales tax for Square gift cards?

[txicecreamgirl]

I purchased the Square gift card starter pack.  I have added them to my items on the register but I don't see where I can apply the sales tax.  Would someone let me know how to apply sales tax to my gift cards?

Thanks!

[Macrule]

In most cases, ok, all cases that I'm aware of, you do NOT charge sales tax when selling a gift card. Sales tax is only collected when items are purchased with the card. The individual using the card to purchase taxable goods or services is required to pay the tax.

[txicecreamgirl]

Thank you for your reply.  How does that work when someone comes in to redeem a gift card?  In the past when i have bought or received gift cards and went to use them, I have never had to pay anything (i.e., sales tax) because the gift card was a gift and was already bought and paid for.  That has been my personal experience with gift cards.  You're saying that if someone receives one of our gift cards for Christmas, when they come in to redeem it, we charge them sales tax?  I thought this should be done on the buyer's end - the person buying the gift card.  

[txicecreamgirl · Accepted solution]

I am answering my own question in case someone else has the same issue and since no one else has chimed in.  Here's what I found at csmonitor.com:

"There is no centralized list of every state's gift card sales tax policies- probably because most don't explicitly have any- but the experts agree. "To my knowledge, no states charge sales tax on gift cards," says Shelly Hunter, a.k.a. "The Gift Card Girlfriend" at GiftCards.com.

Taxing gift cards also just wouldn't make sense: though the card is bought in one state, it could be redeemed in another with a completely different sales tax. Also, it could create a potential double-whammy if both the gift card itself and the purchases made with it are taxed."

So it seems that no one pays tax for the gift cards.  They are considered "cash for cash" transactions with no tax applied.

[Sean]

@txicecreamgirl - Thanks so much for following up! This is great information, and I'm sure another seller will find it useful. 🙂

[THofferLMT]

Thanks for posting your own answer.  It's 2020 and I was searching this very question about sales tax on gift cards and came across your answer.  Just wanted to let you know.  Have a great day!  

[isabelle]

Always happy to hear that the Seller Community can provide valuable answers to our sellers @THofferLMT!

Hope to see you around the Seller Community more 🤓.

[NewLine1]

I have several clients who want to purchase an e-gift card for either a 60 or 90 minute session. I charge a sales tax on my sessions so the totals are not an even $80, etc. Is there a way we can have egift cards set-up for a particular service like the 60 or 90 minute session and have it charge the purchaser the full amount?

[Goldneye]

HI, after researching, I was able to find this Square Discussion regarding sales tax.

https://www.sellercommunity.com/t5/Questions-How-To/How-do-I-add-sales-tax-for-Square-gift-cards/td-...

Hope this helps!

Terri

🛍 Shop my store

Resale Collection - http://bit.ly/HangerHues

[AshleyK]

@Goldneye Thanks for posting that!! I've merged this thread in with the existing one to keep all the inquiries in one place. Thanks again for all your help in communicating answers. 🙂

[namastewatford]

This is a good thread.. few Questions regarding Gift-Card and Tax.

I prefer to giveaway gift cards worth some amount as promotion for their purchase in future. Not selling it.

- in this case, when they do a purchase using gift card, Can I fix a rule not to charge any sales-tax/VAT for that?

or if no such mechanism, can I get a report of all taxes which were accounted for gift-card sales, so I can do a manual adjustment?