Gift Cards: The Gift That May Keep Giving … Back to the States

Sovos
July 30, 2019

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.

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Get in touch with a Sovos unclaimed property expert to learn more about managing your unclaimed property compliance processes.

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Author

Sovos

Sovos is a global provider of tax, compliance and trust solutions and services that enable businesses to navigate an increasingly regulated world with true confidence. Purpose-built for always-on compliance capabilities, our scalable IT-driven solutions meet the demands of an evolving and complex global regulatory landscape. Sovos’ cloud-based software platform provides an unparalleled level of integration with business applications and government compliance processes. More than 100,000 customers in 100+ countries – including half the Fortune 500 – trust Sovos for their compliance needs. Sovos annually processes more than three billion transactions across 19,000 global tax jurisdictions. Bolstered by a robust partner program more than 400 strong, Sovos brings to bear an unrivaled global network for companies across industries and geographies. Founded in 1979, Sovos has operations across the Americas and Europe, and is owned by Hg and TA Associates.
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