Sales Tax Rules for Gift Cards, Loyalty Rewards, and Promotions

• Gift cards are usually not taxed when purchased; sales tax is typically applied when they are redeemed for taxable goods or services.
• Promotional gift cards can be more complicated, because states may treat them either as a discount on the original sale or as separate value depending on the program’s structure.
• For promotions, the key issue is often who funds the discount (retailer, manufacturer, or other party), not just whether a customer received a discount.
• Different states have different rules, so businesses with multi-state sales should check state-specific guidance to stay compliant.

Source: taxconnex.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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