I have been asked several times, does sales tax apply to the sale of gift certificates?
Many photographers sell gift certificates to friends and family members of their clients. Gift certificates are great way newlyweds to purchase albums, prints, gallery wraps and more with some financial help from others. Photographers often wonder how to apply sales tax to the sale of gift certificates so I thought it would be helpful to mention this topic in a blog post.
The sale of a gift certificate is generally not subject to sales tax at the time it is purchased. When a purchaser uses a gift certificate as payment for their items, any sales tax due on that purchase is collected at the time of the sale on the total amount of the sale. This is best explained in the following examples.
1. A family member or friend of the client purchases a gift certificate for $100. No sales tax is collected on the purchase of the gift certificate.
2. At a later date, the client purchases $200 in prints. With 6.25% sales tax applied to $200, the total amount due is $212.50. The extra $12.50 is the sales tax that was applied to the sale. The client presents a gift certificate for $100. This amount is subtracted from the total amount due, so now the client owes you a payment of $112.50.
I hope this information is helpful. Are you wondering what to do with discounts, coupons, freebies, promotional items, print credits and more? These are just a few of the many other types of transactions covered in the ebook Super Simple Sales Tax for Photographers, in addition to gift certificates. It is often difficult for photographers to get simplified information on when and how to apply sales and use tax to their photography business sales. I wrote and ebook to help change that!