Gift Cards and Gift Certificates
Taxes are due when the gift card/certificate is redeemed by the holder. When the card/certificate is used, the taxes due on the sale depend on the nature of the item or service purchased:
- When a customer purchases tangible personal property and/or retail services, sales tax is collected and the seller reports Retailing B&O tax and retail sales tax at that time.
- For purchases of sales tax exempt food products, only Retailing B&O tax is due.The seller should report the income for sales tax, then take an "exempt food products" deduction.No sales tax is due.
- If the card/certificate is used to purchase a service (a haircut, for example), the seller reports the transaction under the Service B&O tax classification. No sales tax is due.
When an item is purchased on layaway, the seller does not enter the transaction as a sale until the customer takes delivery of the item. Upon delivery, the business will collect and report retail sales tax and Retailing B&O tax.
If the customer does not complete the terms of the layaway and forfeits the deposit, the seller will report this income under the Service B&O tax classification, because there is no retail sale to charge sales tax. Resource: WAC 458-20-103
Prepaid Telephone Debit Cards
Unlike sales of gift cards/certificates, sales of prepaid telephone debit cards are subject to retail sales tax. See ETA 3093.2009.