Gift Card Concerns for Small Businesses

Gift cards have become very popular with customers and a successful retailer’s marketing tool.   Point of sales accounting systems, such as the QuickBooks Point of Sales software, make offering gift cards easy for small retailers.  (Gift certificates are included in the use of the term gift cards.)

After the gift card sale, small companies (as well as large companies) need to be concerned with correct accounting and that federal and state regulations are complied with.  Both of these concerns, accounting and compliance, can be easier dealt with successfully by using information found by searching the Internet.

Below are identified some websites that are good sources of information for addressing concerns that small company retailers might have with gift cards.

In 2009, the US Congress passed the Credit Card Accountability, Responsibility, and Disclosure Act (the CARD Act).  A section of this act deals with gift cards.  A Federal Reserve Board (FRB) site provides an overview of how this act applies to gift cards.  Click here go to this FRB site.  Gift card rules in this act do affect how retailers account for gift cards.  For example, a gift card must be good for at least five years from the date of purchase.

In addition to this federal act, states may have rules that are applicable to gift cards.   Rules are usually associated with the states’ unclaimed property procedures.  Gift cards that are not used (redeemed) can represent unclaimed property to the issuing retailer.  Mary Bernard has written a short overview of aspects of unclaimed property laws affecting gift cards.  Click here to read this overview.  Small companies should read their state’s web pages dealing with unclaimed property procedures and how gift cards might be affected.  Searching on the terms unclaimed property and adding your state’s name should bring up a link to your state’s webpage dealing with unclaimed property, from which information on gift cards (certificates) might be found.

Three review articles dealing with gift card issues, including compliance with unclaimed property rules, are excellent sources of information.  The accounting firm Grant Thornton has an article on opportunities and issues for retailers in their use of gift cards.  One section deals with accounting for gift cards.  Click here to read this article (PDF file).  Another article, written by John A. Biek at CCH, delves into tax issues and unclaimed property aspects of gift cards.  Click here to read this article ((PDF file).  The third article, by Michelle Andre at KPMG, focuses on the issues of gift cards with respect to unclaimed property compliance.  Click here to read this article (PDF file).