New York Assemblyman Bob Reilly introduced a new bill in an effort to collect additional sales taxes, by making retailers collect sales tax at the time gift cards are purchased. The subsequent purchases made with the gift card would be tax exempt. The full text of bill 9035 is available on the New York Assembly webpage.
There are several problems with the bill as introduced:
- Gift cards are often bought in one location, with the intent of gifting them to another person, often in a different jurisdiction. This would mean double sales taxes - to New York and then again to the state where and when the card was actually used. The exemption at redemption would not apply if the card was redeemed in another state.
- Assembly Bill 9035 also provides a difficulty in handling differences local sales taxes. If the card is purchased in one location but redeemed in another city, the rates will often be different, with the accompanying difficulties for the consumer and the local taxing jurisdiction.
- Retailers will have to re-design or re-program their point of sales units to handle the tax exemption. This difficulty is increased since sales with gift cards are often above the face value of the gift card. This results in a sale with a partial sales tax exemption, making it difficult for the front line employees to handle.
- As we have seen with the New Jersey gift card legislation and subsequent litigation, attempts by state legislatures to change the duties of gift card issuers will be met with much resistance, particularly when it appears to be nothing more than a tax revenue grab.
Barganier will continue to monitor the progress of this bill as it affects our gift card issuer clients. Check back for additional updates.
Senate Bill 6288 is also pending, which would provide statutory authorization to issue payroll wages in the form of a stored value card.