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Connecticut: Are Holiday Gift Cards Subject to Sales Tax?

  • Dec 10, 2013 | Gail Cole

 Holiday shopping? Done and done.

Update, 12.13.13: The Connecticut Department of Revenue, having learned that some shops were charging sales tax on sales of gift cards, released a bulletin, Commissioner Sullivan Advises Shoppers: Don’t Get Taxed When Buying Gift Cards. If you were charged sales tax on the purchase of a gift card, the commissioner suggests you return to the store with your receipt and ask for a refund.

We’ve all been there. You’re getting together with family for Christmas in just a few hours, and you’ve got nothing to give ­­­­­­­­______ (fill in the blank: Great Aunt Lenora, your teenage niece, your second cousin Bill (or is he your first cousin once removed?). A gift card is pretty much the only hope you have to save face and spread a little Christmas cheer.

You purchase a gift card at one shop in town and you’re charged sales tax on the amount of the card. You go to another shop, purchase another card, and you’re not charged sales tax.

Which shop made the error? Should sales tax be charged when a gift card is purchased or when the recipient of the gift card uses it?

A shopper recently encountered this situation in Connecticut, and, noticing the discrepancy, sought clarification.

Survey says… no sales tax is due on the purchase of a gift card.

According to Sarah Kaufman of the Connecticut Department of Revenue Services (DRS), a store should not charge tax on the sale of a gift card. Gift cards are “cash equivalents.”

When a gift card is used, however, “[t]he card holder is responsible for the tax on any items purchased with the card.”

Once the Department of Revenue Services learns that a shop has handled sales tax incorrectly, it must act. Says Kaufman, “When we learn about retailers improperly charging sales tax, we contact them to have them correct their practices.”

Interested in learning more about how your last-minute holiday shopping will be taxed? Read about Connecticut’s Sales Tax Treatment of Coupons, Scan Cards, and Cash Equivalents, Promotional Items, and Rebates.

Avoid a call from the DRS this holiday season. Switch to an automated sales tax solution.

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photo credit: Mr. T in DC via photopin cc

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.