K-Mart, Gift Cards and Taxes

@CatsandDogs (13964)
United States
February 24, 2009 11:40am CST
Yesterday, after getting my hearing aids, we went to K-Mart to get a gift card for our God son for his 10th birthday, that's what he asked for. As we did for the other two kids, we got him a $30. gift card and can you believe that we had to pay taxes on the amount put on the gift card?! YES!! We had to pay taxes on the gift card!! The total came to be $32.02 in which we were shocked! We've never heard of such a thing! We could get gift cards anywhere else and not have to pay taxes on it so why is K-Mart different? Being that our God son asked for it to be from that particular store, we had no choice really, but to suck it up. So does anybody get the understanding on why this is? Because it makes no sense at all that we could get a gift card from so many other places and not have to pay taxes but K-Mart you do. I thought we paid taxes when we purchased something....
5 people like this
13 responses
@dvschic (1796)
• United States
24 Feb 09
i would fight it!! but i'm in california, what state are you in?? Per CA law, sales tax is not charged on the value of a gift certificate (it is after all an intangible item and sales tax is applied when acquiring a tangible item). Having said that, I do not know what other states do; it depends on where the gift certificate was purchased. I would talk to a manager. I had a similar situation occur because the website did not know how to stop the sales tax from automatically being charged during check out. http://parents.berkeley.edu/advice/holidays/giftcertificates.html
3 people like this
@webeishere (36353)
• United States
24 Feb 09
I am thinking it may actually be a handling fee. As I look at a gift card as more or less a debit card which is cash in a sense and not a taxable item. I would question the store manager(s) about this so called tax as well. HAPPY POSTINGS FROM GRANDPA BOB !!~
1 person likes this
@dvschic (1796)
• United States
24 Feb 09
K-mart has gotten into big trouble for their handling of gift cards before. the only cards i know that have an 'activation' fee are the cash cards/prepaid visa cards, those have an activation fee. gift cards are to be treated as cash and are not taxable in 99% of states. you may be in the weird state that has tried to drum up some revenue
2 people like this
@CatsandDogs (13964)
• United States
24 Feb 09
I'm in North Carolina and I bought the gift card in Greensboro which is about a 45 minute drive south of where I live. I probably should've protested it and I did but only to the cashier because we were in a hurry to get to my parents place before it got too late because of the cold. I kind of brushed it off being it's only 2.02 but hopefully next time, if there is a next time, I'll take the time to protest. Thanks again!!
1 person likes this
@webeishere (36353)
• United States
24 Feb 09
Personally I would go back and question this tax on the card. I have bought many gift cards and have yet to pay tax on the card. It is basically cash, not an item. Maybe they will call it a handling fee if you confront them. Some places will charge a handling fee which I feel is also wrong. HAPPY POSTINGS FROM GRANDPA BOB !!~
@CatsandDogs (13964)
• United States
24 Feb 09
I questioned it with the cashier and she said she just rung it up like she's suppose to and it says that I owed the tax amount and I explained that not on a gift card and she said the same thing. I let it go because we were in a hurry. I won't let it go the next time IF there is a next time....
1 person likes this
@coffeebreak (17820)
• United States
26 Feb 09
Wow! Although I am not surprised...stores will try anything it seems. I would have made a big deal about it so others could have heard and know and then I'd a told them to forget it, I'll take my business elsewhere. Then I'd a gone home and created a personalized gift card and stuck the cash in there with a piece of string "attached" to the envelope to indicate it was to be spent at Kmart only since that is where you godson wanted it for. I get so tired of these "service fees".. At my apt complex the new management started sending out statments for our rent AND the utilities we have to pay saying that instead of paying all different vendors - water/sewer/trash and then rent seperately, we would now just have to make out one check for all!! Yippee - they say there were trying to make things easier on us!! That was 3 months ago and this month, without a mention, they are now charging us $3.00 "service fee"..to make things easier on us! So I am going to write them a check for the rent and another one for the utilities...at least I'll get my $3.00 worth!
1 person likes this
@CatsandDogs (13964)
• United States
27 Feb 09
Oh trust me, I wanted to make a big issue of it but I was in such a hurry with so much to do before going to my parents house that I just sucked it up and left. There won't be a next time and I can't send cash because I don't trust their mother to take it for herself. Sad, huh? They're coming up this summer for the whole summer and I'm going to have to make them understand that they're going to have to wait till they see us to get their gift cards. They don't need to know why but that they'll get them when they see me, that way I'll KNOW they get their cards and spent it on themselves as it was meant to be.
1 person likes this
@coffeebreak (17820)
• United States
27 Feb 09
Oh yeah, I hear ya on that one! Had similar problems! Good luck!
1 person likes this
@ElicBxn (60802)
• United States
25 Feb 09
make sure you tell them you paid taxes, because they shouldn't have to pay sales tax again - or that's double taxes
1 person likes this
@CatsandDogs (13964)
• United States
25 Feb 09
Our God kids are in Florida and we're in North Carolina.... don't think it would do any good to let them know. Oreo said she has to pay taxes on all of her gift cards that she buys and she lives in GA but still, I've gotten a gift card from Walmart in my and the same state K-Mart is in and yet I didn't pay taxes on it. It doesn't make any sense.
2 people like this
@ElicBxn (60802)
• United States
25 Feb 09
I got a gift certificate once, and wanted to be sure that if I paid taxes on it, they wouldn't but it wasn't a gift card, it was for a local only business and they included that in the note with the gift certificate
1 person likes this
@mentalward (14697)
• United States
24 Feb 09
You're right in your thinking, Cats. I've never heard of anyplace making you pay for a gift card! I get gift cards all the time from MyPoints. The points needed to purchase the gift card are the exact amount they make me pay... nothing is added for taxes! I buy gift cards for my friend's two sons, who think of me as their "aunt", every Christmas. Usually, it's for places like McDonald's or Burger King because they love the occasional 'treat' of going there and eating. I buy these cards at WalMart and have NEVER paid taxes on them. In my opinion, something should be done about K-Mart's policy regarding the taxing of gift cards! IF they say they are charging for the actual "card", that piece of plastic, then I'd say they are WAY overcharging for that tiny plastic card. Taxes are indeed paid at the time of purchase FROM the gift card. They are taxing you twice, which is illegal (unless it's our government double-taxing us, of course). My advice is to (1) never buy gift cards from them again (offer to take your Godson shopping yourself or give him $30.00 in cash) and (2) report this to the Better Business Bureau and to any consumer advocacy group you can find. This is unbelieveable. I bet K-Mart has found some loophole that allows them to get away with this. I find it despicable.
@CatsandDogs (13964)
• United States
24 Feb 09
I don't know how they could do it but it's been a while since I bought a gift card and even much longer time since I've bought one from K-Mart so needless to say, I was quite surprised at the transaction but being in a hurry, I let it go but I won't be buying another one from them anytime soon! My Godson lives in Florida and I'm in NC, a bit too far to get him to take him shopping. I don't trust the kids mother to give it to him without spending some of it herself. I gave a gift card from some specialty store for my Goddaughter and she ended up spending most of it on her mom which ticked me off because it was meant for HER not her mother. But being so far away, I can't stop it. I thought that from now on, I'd wait till the kids were up here with us then give them the money and let them buy what ever it is they want, that way they spend it on themselves like they're suppose to. I don't know if I still have the reciept or not, hubby had it last and God only knows what he's done with it but if I do have it, I will go to the nearest K-Mart and protest it. Loophole or not, it's not right.
1 person likes this
@mentalward (14697)
• United States
25 Feb 09
I agree! Maybe, if you go to their website, you will be able to protest from there. I know that WalMart has a page where you can write to the head honchos with any complaints. I've written to them several times!
@Grandmaof2 (7603)
• Canada
1 Mar 09
I totally agreed with Polly #8 response. Think about it if you pay tax on the gift card and your God Son spends the money on a shirt, CD, or whatever naturally you can expect he will have to pay tax on his purchase like anyone else would. BUT... Because she and I could be wrong I phoned Canadian Tire (Yes I forgot to remind you I do live in Canada) and Canadian Tire said you do not pay tax on the gift card. Because I live in Canada I called wal Mart because I know they're American owned and world wide so I called wal Mart and asked them and the answer was the same No you do Not pay tax on a gift card. You had a crappy cashier that didn't know what she was doing. I would definately show your reciept to the manager. I'm sure you won't go broke over the 2.02 but the thing is just think how much revenue this brings in if in fact they do that to most or all customers??? Thanks for the post it had me going ha ha ha.
1 person likes this
@CatsandDogs (13964)
• United States
2 Mar 09
I agree with Polly too but being that I was in such a hurry to get to my parents to do some things for them, I didn't have time to make a big issue of it even though I wanted to. I did wonder if the cashier knew what she was doing but I doubt it. I won't do it again unless I have time to protest and then tell them to keep it and shove it! lol
1 person likes this
• United States
27 Feb 09
that does not make sense to me. because when your God-son uses the gift card he will have to pay taxes on whatever he buys.. that is just wrong....
1 person likes this
@CatsandDogs (13964)
• United States
27 Feb 09
That's what I thought too but I didn't have the time to dispute it with her or the manager so this one time I sucked it up and went on my merry ole way BUT, there won't be a next time.
1 person likes this
@Bethany1202 (3432)
• United States
25 Feb 09
I have never heard of this before, either, and I wouldn't be too happy. I have seen "activation fees" before of outrageous amounts for generic Visa, American Express, or MasterCards, for example, of $4.95 or whatever, but I have never heard of paying TAX on a gift card! How many times ARE we going to get taxed anyway? (Sales tax, income tax, GIFT CARD TAX?, etc etc.....)
1 person likes this
@CatsandDogs (13964)
• United States
26 Feb 09
Tell me about it!! It doesn't make sense and if I had more time, I'd have fought it but I was in a hurry so I just sucked it up and went on my merry way but I can tell you one thing for sure, I won't be getting anymore of K-Mart's gift cards!
1 person likes this
@Opal26 (17691)
• United States
25 Feb 09
Hey cats! I think that you now have to pay taxes when you purchase gift cards because they look at it like it is a purchase of something! Since the person who is going to use it then won't have to pay the taxes I guess? I'm not sure, but I think I have paid taxes when I got gift cards too and not just from KMart! I think that is how it is these days! They will tax anything they can get away with taxing!
1 person likes this
@CatsandDogs (13964)
• United States
26 Feb 09
I didn't have to pay any taxes on the gift card at Walmart so why is it different with K-Mart? Weird. I wouldn't have gotten it from K-Mart but that's where he wanted it to be from. He has his eye on something but don't know what. Anyway, he still has to pay taxes on what ever it is he's buying which is not right. So from now on, they'll get their birthday gifts once they get here in the summer or else forget it. I don't want to pay any more in taxes than I HAVE to. The government is rich enough as it is.
1 person likes this
@mermaidivy (15417)
• United States
24 Feb 09
In my home country, we don't need to pay taxes on purchasing anything but in United States, tax tax tax... It took me a while to accept it. Last week, me and my husband went to a amll to get him a new suit, when we were paying, the cashier said "$$$ and $$$ taxes" We were like"huh?" then the cashier told us yeah when the purchased over $175, it costs you luxurious tax... it's ridiculous to me...
1 person likes this
@CatsandDogs (13964)
• United States
25 Feb 09
Yes it is insane and our government can be overbearing at times. I didn't know what constitutes luxury tax, that is interesting. Maybe you should've bought the suit in separate pieces to get out of that stupid tax. Just because I've been born and raised in this country doesn't mean I agree with what our government does.
1 person likes this
@sunshine4 (8709)
• United States
24 Feb 09
That is crazy! It may be a fee to have it activated. They do this at our mall if you get a visa gift card. They charge $2 for activation. I never get them because I feel like it is just throwing that $2 away. Now when he uses the card, does he have $30 or $32.02 on it?
1 person likes this
@CatsandDogs (13964)
• United States
24 Feb 09
Nope. A flat $30.00, nothing more and nothing less. Makes no sense to me because I've bought a few gift cards just as anybody else has and this is the first time I've ever had to pay taxes on one or activation fee or what ever. I bought one a while back for my other Godson and it was at Walmart and I didn't have to pay taxes on it. Weird.
1 person likes this
@Polly1 (12649)
• United States
25 Feb 09
They will be charging double taxes on that money. When the card is used there will be taxes too, that just isn't fair. I never paid attention when buying gift cards so I don't know if I have had to pay taxes or not. I would call Kmart and ask them, maybe they have a good answer.
@CatsandDogs (13964)
• United States
25 Feb 09
Please do that!! Then make a discussion on what you've found for I don't want to miss the answer! lol Being in a hurry yesterday, I didn't protest too much because I didn't have time to but it did make me mad but I sucked it up and went on my merry ole way.
3 people like this
• Canada
1 Mar 09
You are one smart cookie!!! hehehe I need to tell you I agreed with your answer and called to find out what they do here.
1 person likes this
@GardenGerty (97882)
• United States
11 Apr 09
I think it is a scam they are running on the public in general. You are correct, you pay taxes on the money when you spend it off of the gift card. K Mart is basically indulging in double taxation.