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09/25/2007

Laws Affecting Gift Certificates Tough On Small Businesses

More than 30 states have enacted laws banning gift cards and certificates with short expiration periods, requiring issuers to turn over cash from expired cards to the state. (Eight states have added such laws in 2007 alone.)

Caught in the middle is the small business entrepreneur, especially those who thrive on gift certificates such as restaurants, spas, and hair salons.

New Mexico law, for example, requires certificates to be valid for five years and forces issuers to turn over 60% of the value of the expired cards. (A percentage that far exceeds a company�s variable cost of doing business, and one of the reasons for selling and bartering gift certificates.)

While the politicians view this as a wonderful generator, thinking they�re getting at the titans of the industry�the big-box stores�they�re really affecting the small business owner. These entrepreneurs are the overlooked and under-appreciated power which makes up 50% of America�s GNP and is responsible for 99% of the jobs in the private sector.

Every state has a different set of rules. In California, you�re not allowed to put an expiration date on a gift certificate...except in very rare instances. This is largely because gift certificates are typically purchased with cash, and it�s not fair for a consumer to lose out on a service just because one didn�t move quickly enough or because the gift was received on a later date.

When it comes to rebates, coupons and other discounts, anything goes. But once a consumer has purchased a gift certificate, it�s good for life as far as California is concerned.

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