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Dynamics 365 Community / Forums / Microsoft Dynamics RMS (Archived) / reduce sale amount by ...
Microsoft Dynamics RMS (Archived)

reduce sale amount by amount of promo card

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Posted on by Tim Webb 555

I have a store opperating in Ohio in which they just changed the tax law regarding promotional gift cards. Prior to the change the current functionality of taking a giftcard as a tender type and collecting tax on the full amount was correct. Now they are requiring us to reduce the amount of the sale by the amount of the gift card and then charge tax based on the reduced amount. Correct me if I am wrong but I cannot find a way to systematically do this within current RMS/POS.

 

Any thoughts. Thanks

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  • Craig Wood Profile Picture
    Craig Wood 785 on at
    Re: reduce sale amount by amount of promo card

    I understand your dilemma, and I'm certainly not arguing which way you should or should not handle this. However, I think you could make a case that the Gift Card is not a product itself but rather a credit in the store and is therefore not subject to sales tax in any way. The sales tax would be collected on the actual products purchased and taken possession by the customer using the credit. Maybe just renaming the reward "credit in the store" rather than "gift card" would make sense? It seems to me the state of Ohio is confusing what a gift card is(purchased by one customer as a gift for another customer) versus a customer loyalty reward of credit to use in the store, which most merchants call a gift card so the customer understands easily how to redeem it.

    What a mess! Typical of government  regulations that try to overreach and control every little aspect of how  we operate our business's. Good luck to you trying to figure out how reward your best customers with a "simple" credit on their purchase..

  • Tim Webb Profile Picture
    Tim Webb 555 on at
    Re: reduce sale amount by amount of promo card

    Normally I would say what does it matter and how could we even track which are promo cards and wich are not. However our tax and legal teams are not comfortable with the risk of class action lawsuit due to over charging customers tax.

    Thanks

  • Tim Webb Profile Picture
    Tim Webb 555 on at
    Re: reduce sale amount by amount of promo card

    Let me provide some additional clarity.

    Per the copied info below from the tax law;

    Ohio states that if you give a gift card say $10 as a "free" reward for purchasing something in your store, then at that time the customer pays full tax on the amount of the product purchased.

    However when that same customer goes to redeem that gift card Ohio states that the customer is not responsible for the tax on the "price" that was paid for by the Gift card.

    In other words

    original sale

    $100

    +$10 Tax

    +$10 GC - Promo Free

    = $110

    Redeemed GC sale

    $100

    +$10 tax

    Apply $10 promo GC

    Reduce sale to $90

    there for reduce tax to $9

    for new subtotal $99

    This is how the new Ohio law states sales using a gift card that was given out as a promo must be processed.

    For its part, Ohio has attempted to provide some clarity and sanity to the situation. Am. Sub. H.B. 153 added a new section to the definition of "price." R.C. 5739.01(H)(c)(v). The new provision makes it clear that Ohio sales tax does not apply to the portion of the price paid for an item or service with a gift card that is provided as part of a loyalty or award program. This statutory exception does not apply to all gift cards and gift certificates. Rather, it applies only where the following requirements have been met: 1) the gift card cannot be one that was sold by the vendor or purchased by the consumer; 2) the card must be distributed pursuant to the vendor’s award, loyalty or promotional program; and, 3) the vendor cannot receive any reimbursement or compensation from a third party to cover any of the value of the card (such as where manufacturers reimburse stores for the value of coupons the manufacturer provides to shoppers). Importantly, the legislation provides that a customer’s purchases at the store will not be considered compensation to the store for the purchase of the gift card. This ensures that the redeemed value of the gift card will not be subject to sales tax because under the circumstances it is neither sold by the vendor nor purchased by the consumer.

  • Suggested answer
    Craig Wood Profile Picture
    Craig Wood 785 on at
    Re: reduce sale amount by amount of promo card

    If you give away a gift card you are essentially giving credit to use in your store. There is no tax collected on that gift(gift card) since they are not buying anything at that time, you are just giving them the credit to buy something later. When the customer comes back to use the gift you gave him(gift card) he buys the items from you and you charge him the appropriate tax on those items just like any other sale. At that time he then presents you with the gift card you gave him(credit in your store) and you apply that towards his total sale, including taxes, lowering the amount he owes you on that sale and then finishes paying with another tender to complete the sale. The sales tax is collected on the items he buys with the credit you gave him, not on the credit itself. Even the state doesn't get to double dip which is what would happen if you charged him tax on the credit you gave him.

         Giving away actual items is different since that would be final(you aren't giving credit to use later). Any product you give away to a customer you would pay the sales tax on, unless you pass that tax onto the customer(bad for business).

  • Tim Webb Profile Picture
    Tim Webb 555 on at
    Re: reduce sale amount by amount of promo card

    Jeff,

    Thank you for the follow up. I have talked with my tax teams as well as some additional research of my own and have determined that the interpretation of the link you sent me is incorrect. The way the ohio law states, if it is a "promo" gift card then when redeeming that gift card you must reduce the subtotal by the amount of the gift card that the customer is then only paying the tax on the reduced amount.

    Short of doing a hook that would set a discountOffAmount, I don't know another way to do this. My concern with that route is. How will I know wether the GC is a promo one or a purchased one?

    Dilemma.

    Thanks

  • Jeff @ Check Point Software Profile Picture
    Jeff @ Check Point ... 13,382 on at
    Re: reduce sale amount by amount of promo card

    Tim,

    Here's a link that might describe the issue better; http://www.vorys.com/publications-439.html  You might be confusing gift cards with loyalty cards. 

    Collecting payments (gift cards/certificates), has nothing to do with taxes. 

    The giving away of loyalty cards is what is subject to taxation. For that I don't have an answer other than no more loyalty cards. ;-)

     

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