Of all the things for county money-managers to be worried about, how and when gift cards are used should be at the bottom of the list. Yet here is Mecklenburg County finance director Harry Weatherly fretting that the sale of gift cards during the holiday season is somehow depriving the county of sales tax money.
Stores sell gift cards tax-free because purchases made with the cards are taxed. Weatherly says at the very least that practice time-shifts the taxable event for the county to later in the year and, perhaps, means that gift cards purchased in Mecklenburg are used to make taxable purchases in some other jurisdiction. And? So? Presumably the reverse also happens, so things should even out. But it sounds like Weatherly is worried that Mecklenburg’s extra half-cent levy to pay for choo-choo trains is driving people to have taxable purchases elsewhere. Yeah, well, having higher taxes tends to do that.
I don’t want to jump to conclusions, but this sounds like the beginning of an argument to collect tax on the sale of gift cards. In theory, this really should not matter that much, other than to probably depress the value of the card people could afford. But practically it would fall to merchants and retailers to then track all purchases made with gift cards to make sure not to charge sales tax again when they are used. Who knows how much that little wrinkle would cost the private sector.
For that reason the current method of taxing gift card sales and purchases makes the most sense. Besides, Mecklenburg’s sales tax revenue is only going up every year, any gift card leakage is not changing that.
