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.
