Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2017
Sales and Use Tax Annotations
280.0000 GIFTS, MARKETING AIDS, PREMIUMS AND PRIZES— Regulation 1670
280.0581 Gift Certificates. A public television station as part of its fund raising activities conducts an annual auction. A merchant who wishes to contribute pledges a specified amount which the station incorporates into a gift certificate. The certificate is made redeemable in merchandise at the merchant's store. The station auctions the certificate to the highest bidder who, in turn, redeems the certificate at the merchant's store. The following example illustrates an application of the sales tax.
The station receives a gift certificate donation for $200 worth of jewelry. The gift certificate is purchased at the auction for $150. The certificate is exchanged for a ring retailing for $180. The buyer pays $150 to the station and $11.70 (6.5% of $180) to the donor.
It is concluded that the above example illustrates the proper application of sales tax. The following language which was proposed to be included on the gift certificate is also approved: "Tax, if applicable, will be collected by the donor. The tax is based on the price of the merchandise received." 3/11/81.