Kevin Hunt: One Store Charges Her Tax On Gift Card, One Doesn't: Which One Violated State Law?


Gift cards (happy holidays, everyone) is the subject of today's edition of "Is It Just Me?" where no question is too small for The Bottom Line.

Q: Is Connecticut sales tax charged when a retail gift card is purchased?

I purchased a $25 gift card at [a retail store] in West Hartford and was charged sales tax on the full amount of the card, but when I purchased two retail gift cards for $25 each at CVS I was not charged sales tax.

Also, if sales tax is charged, is tax paid again when the recipient makes a purchase with it?

Marianne Bangham, Unionville

A: The store should not have charged tax on the gift-card purchase, says Sarah Kaufman, the state Department of Revenue Services' spokeswoman. The DRS policy statement classifies gift cards as "cash equivalents."

"Your shopper should print the policy statement to show the retailer when she returns to get a refund of the tax she was charged," says Kaufman.

Once a gift card is purchased, however, the rules change. The card holder is responsible for the tax on any items purchased with the card.

A few things to know this gift-card-giving season:

>> Gift cards sold by Connecticut businesses do not expire, nor do gift cards and gift certificates sold online (or by phone) that are delivered to Connecticut.

>> These cards cannot charge an inactivity fee.

>> If the local business that issues a gift card or gift certificate closes, the consumer might not recover any remaining funds on the card or certificate. The state Department of Consumer Protection, in its monthly newsletter released Monday, urges consumers to use a gift card as soon as possible.

>> A gift card issued, or supported, by a federal financial institution such as Visa or American Express follows federal, not state, regulations. These cards can expire after five years. They also may charge an inactivity fee after one year.

Because of Bangham, the store that charged her sales tax can expect to hear from DRS.

"When we learn about retailers improperly charging sales tax," says Kaufman, "We contact them to have them correct their practices."

Talkback

A response to a recent column (read it at bit.ly/HhTvmq) on attempts by Barbara Alex of Windsor to get her terminally ill brother from Seattle to Connecticut without absorbing airline-flight cancellation fees:

"In my eyes, the real issue is how American Airlines can charge anyone, sick or well, $200 to change an existing reservation that, at best, might take any reservation agent 10 minutes to complete.

"My wife and I visit our daughter, and her family, in southern California for a few months each winter beginning in mid-December. I recently booked round-trip tickets for the two of us, for which we paid $925.

"Two days after making the reservation our daughter . . . [asked if] we would be able to change our return flight. I was told, yes, there were available flights at the same price, however there would be a $400 charge. A supervisor was willing to make the change for $200.

"I see no harm if federal legislation dictated that airline companies can charge no more than $25 to change tickets to other days."

Paul Silvergleid, South Glastonbury

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