Apple’s Sales Tax treatment of back-to-school gift card promotion rebuffed again on appeal

In November 2018, I posted about a New York State Division of Tax Appeals administrative law judge decision finding that an Apple Inc. “Back to School” promotion for sales of computers and iPads required customers to “purchase a qualifying computer or tablet in order to receive a gift card for free” and not “to purchase a gift card to receive a discount equal to the value of the card.” The distinction is significant because a retailer-provided discount representing a reduction in the sales price of an item of tangible personal property is deductible when calculating the retailer’s taxable receipts for New York sales tax purposes, whereas the purchase/sale of a gift card itself is not subject to New York sales tax. It is only when a gift card is used by a customer to purchase an item of tangible personal property that a gift card transaction becomes subject to New York Sales sales tax.

Apple recently “took another bite at the apple” and tried to persuade the New York Tax Appeals Tribunal that the ALJ decision was erroneous in finding that Apple’s promotion “was premised on the full retail price of a qualifying device and a free gift card.” Apple argued that the gift card “was purchased rather than given away,” pointing to the promotion’s return policy, which “required contemporaneous return of the unused gift card, otherwise only the discounted price of the qualifying device would be refunded.”


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