Posted on 11/08/2007 5:52:42 AM PST by Reaganesque
I was listening to the radio this morning when I heard of a bill that has been proposed in the Maryland Legislature. House Bill 30 states:
From the summary:
From the bill itself:
(C) (1) THE BALANCE REMAINING ON A GIFT CERTIFICATE SHALL BE PRESUMED TO BE ABANDONED ON THE LATER OF:
(I) THE DATE THAT IS 4 YEARS AFTER THE DATE THE GIFT CERTIFICATE IS PURCHASED; OR
(II) THE DATE THAT IS 1 YEAR AFTER THE DATE OF THE LAST PURCHASE MADE USING THE GIFT CERTIFICATE.
(2) ON OR BEFORE MARCH 1 OF EACH YEAR, A PERSON THAT SELLS OR ISSUES GIFT CERTIFICATES IN THE STATE SHALL REMIT TO THE COMPTROLLER THE BALANCE REMAINING ON EACH GIFT CERTIFICATE THAT WAS PRESUMED ABANDONED DURING THE PREVIOUS YEAR.
(3) ON OR BEFORE APRIL 1 OF EACH YEAR, THE COMPTROLLER SHALL DISTRIBUTE THE REVENUES RECEIVED UNDER PARAGRAPH
(2) OF THIS SUBSECTION TO THE MARYLAND EDUCATION FUND ESTABLISHED UNDER § 5–201.1 OF THE EDUCATION ARTICLE.
(Click on "House Bill 30" title at the top of the summary page for the full PDF copy of the bill.)
“There is a cost to business for issuing gift cards.”
Yes but the cost is lower than the amount of free interest received on the dollar amount of the card until it is redeemed. And less than the amount that never gets redeemed.
If they are such a poor investment why do companies offer them? For the same reason they offer mail-in rebates. They know many of them will never be returned and therefor it’s free money, or you might say theft.
This is exactly what should happen to the unclaimed funds.
If you bought a Visa gift card, and gave it away to never be used, then the funds are not abandoned property. They are sitting in Visa's accounts pending use of the abandoned gift card. The State has no claim in the matter.
Maryland “Freak State” PING!
American express offered to produce $50 gift cards for less than $50 for one company. The reason? It can be statistically measured how many of those certificates will never be redeemed. They pocket the difference.
The states desire to confiscate the funds after four years is a legal problem if the gift card has no expiration date. Basically they are saying that we want the money but if the guy ever does use it after the four years we’ll refund it. Otherwise it is ours.
It is tacky and stinks. It also completely destroys the profitability formula. It eliminates the main incentive for companies offering gift cards.
Yep.
To this issue, I also heard that MD will be collecting on delinquent bank accounts. This via a caller to Baltimore’s WCBM 680 AM.
I do not have independent confirmation on the story.
I do understand that the time period which constitutes a delinquent account was resently changed from 5 to 3 years in the Maryland legislature.
Pathetic.
I won’t threaten to move out of state, but my wife and I may need to get our business out of the Freak State.
Any time you’ve ever said “Hey, buddy, I owe you one” and didn’t follow through, you have to turn all those unpaid favors to the state.
Any time a friend invites you over to dinner and you don’t repay the favor, you have to take the state out to dinner.
Any time a Godfather says “One day, and that day may never come, I will call upon you for a favor,” and that day never comes, you will owe the state that favor.
Yeah, I heard this on the morning radio too.
Funny is that this is exactly like the Columbia Mall’s “gift card” deal the other year before Christmas. If you still had money on it after 6 mos or something like that, they’d start deducting from its value!
(And worse, there was no real electronic tracking of it, so if you don’t know the rate and what exact you have on it, you wouldn’t know what you’ll end up with next time you try to use it at some store!)
This is like the same thing. Start taking money (in who knows what kind of increments) off your “gift”. You’re paying a fee for NOT using it. Geesh.
“A PERSON THAT SELLS OR ISSUES GIFT CERTIFICATES IN THE STATE SHALL REMIT TO THE COMPTROLLER THE BALANCE REMAINING ON EACH GIFT CERTIFICATE THAT WAS PRESUMED ABANDONED DURING THE PREVIOUS YEAR.”
Maybe I’m not understanding, but “a person” in this case HAS to be a CORPORATION - “people” do not “issue” and sell gift cert’s.
Anyway, how does Outback and McDonald’s and Nordstrom and Macy’s and Joe’s Xtreme Shop keep track of when something is “due” and how much is left???? More niggling irritating petty regulation on business by government.
Sigh.
No, Baltimore will be just as rotten as it already is as 1 of the “richest” “ED” systems in the state.
ALL YOUR GIFT CARDS ARE BELONG TO US!!!!
Can you read?
Once again....you and I are only allowed gifts of cash to a max of 11 thousand something a year. After that, we must pay taxes on it.
And yet, in defiance of all that I’ve written, you still respond, stupidly, that a business should be allowed to keep MILLIONS of dollars a year, tax free.
For isn’t this money now essentially a contribution?
I did write a long explanation that most of these cards have expiration dates. I also wrote, which you obviously did not read, that this is for a reason. Once the date of the gift card expires, it CANNOT be redeemed. I’ll grant you the expiration date might be a couple of years nowadays but once it’s written off...and businesses cannot keep this liability on their books forever, it CANNOT be redeemed.
Now, once the money can’t be redeemed then the business should be allowed to keep it? What...tax free? Is this business a charity? I gave you a hundred bucks on a Visa card, you didn’t use it, the card expired, now the bank on which I drew the funds gets this...what...free contribution of cash? For once it’s written off it’s free money.
I’m done. You people might be fine conservatives some of you, but you’re going the liberal route of knee jerk responses without thinking it through.
conservatives generally read and comprehend.
I’m done with you tooo....go back and read.
Businesses should be no more responsible for the unused gift card than for the uneaten fruitcake or the unworn necktie. They sell the cards in good faith, prepared to honor all of them but knowing - as a practical matter - that some will never be used and others only partially used.
No. Actually, in most cases, it a a prepayment for a retail sale to be completed by the recipient of the gift card. It is kind of like any other prepaid expense as when someone pays in advance for a product or service. The gift is between the "giftor" and the "giftee". The merchant sees the transaction as a prepayment toward a future sale and should count the prepayment as a liability.
The rub comes when the sale is not completed. If the card expires, it is no longer a liability. Also, the card would also loose its characterization as a liability once the merchant determines that it is unlikely to be redeemed regardless of whether it has a stated expiration date.
In the case of prepaid expenses that exceed the amount of the actual expense, merchants generally refund the prepaid balance to the customer. In the case of a gift card, refunding the amount of the unused prepayment makes sense theoretically but it may not be practical.
It is clear that the merchant cannot properly keep the money. If he keeps it, it clearly is taxable income. Perhaps he could dispose of it as a charitable donation. I hate the idea that the state gets it by default just because of the passage of time.
The end result, as others have pointed out here, will be that people will stop buying gift certificates and businesses will eventually stop issuing them. Then the MD state legislature will have to find another “creative” source of revenue. Liberals have no understanding whatsoever of even the most basic of economic principles.
Why do you assume the money businesses get from unused gift cards is tax free? Once the card expires, the liability is liquidated and a revenue is recorded. This goes into the income statement and is therefore taxable.
Indeed, from experience and testing, the issuer of the card will know to the percentage point how much "slippage" will occur. If the retailers sell the card for, say, $25 and the standard retail margin is 25% ($6.25), then the issuer is on the hook for up to $18.75 in goods or services.
But "slippage" -- i.e., the amount that won't be redeemed -- could amount to, say, 20% ($3.75). Meaning that, against the $18.75 liability, they expect to bear actual expenses of $15.00 -- while pocketing $3.75 in profit. This will be built into the issuing company's P&L projection.
Thus, after a period of time, if the State of Maryland intends to confiscate the $3.75, then the issuer will simply raise prices to compensate.
In the end, the proposed confiscation of a corporate profit will result only in another tax burden for the consumer.
Liberals have no idea how businesses operate or how the capitalist system performs. When it comes to Economics, their grade is a universal "F". This is just one more example.
However, I can't see the justification for comfiscation by the state. Better to let the merchant keep it.
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