Sale of Gift Certificate is not subject to Tax. Tax is only recognized upon redemption.
• In principle, Gift Certificates are like an IOU or a liability, and therefore income is only recognized only on redemption.
• In some countries GCs are treated almost like cash and therefore in principle should not be inclusive of tax
As per Australian Tax Office website:
Goods and services tax: Are sales of section 100-5 vouchers, commonly referred to as face value vouchers (FVVs), to retail outlets and subsequent sales of the same vouchers to customers' taxable supplies?
No. The sales of section 100-5 vouchers, commonly referred to as face value vouchers (FVVs), to retail outlets and their subsequent sale to customers are not taxable supplies under subsection 100-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
For section 100-5 vouchers (FVVS), the supply of a FVV for consideration is not a taxable supply, and there is no GST payable on that supply. A GST liability will arise on redemption of a FVV if the FVV is redeemed for a supply of goods or services that is a taxable supply under section 9-5.
A FVV may be supplied through various entities before it comes into the possession of the holder who uses it to obtain supplies. Each supply of a FVV between intermediate entities is a supply to which section 100-5 applies.
Division 100 provides that, except where subsection 100-5(2) applies, the supplies of the FVVs by the entity to a retail outlet and by the retail outlet to a customer for consideration are not taxable supplies. No GST is payable for those supplies. GST is payable by the supplier of the supplies made on redemption of the FVV if those supplies are taxable supplies.
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