This blog was last updated on October 20, 2020
Are unclaimed gift cards reportable as unclaimed property? It all depends.
A recent ruling favoring the state of Delaware against an online retailer brought escheatment of unclaimed gift cards into the spotlight. Unclaimed property is escheated to the state of the property owner’s last known address, but challenges arise with gift cards due to lack of customer information at the time of purchase. Another factor to consider is the fact that not all states require gift cards to be reported.
To complicate matters further, the U.S. Credit Card Act of 2009 advises that gift cards do not expire for at least five years from the issuance date. In some cases, they do not expire at all. The balance could be escheated as the result of inactivity, but the cardholder could use the gift card any time after that, which ensures the retailer would have to work with the state to recoup the money.
How to avoid confusion with unclaimed gift cards
One way to avoid confusion is to encourage cardholders to use their cards within a time frame shorter than the dormancy period. This will require active oversight in order to ensure that the balance does not become unclaimed property. Some companies may view this as a way to engage with their clients, and others may view it as a time-consuming hassle.
The goal, however, would be to research state rules and make sure you do not end up with fines, penalties, and fees for inaccurate reporting. A better safeguard would be to invest in an unclaimed property solution, which will implement each state’s rules and regulations and alert you to when reporting gift cards is required.
Take Action
Get in touch with a Sovos unclaimed property expert to learn more about managing your unclaimed property compliance processes.
