I’m using Point of Success and Mercury gift cards. If I sell a $20 gift card it shows up on that days sales, then when the person uses the gift card a week later, it reports another $20 in sales. What am I doing wrong here?
Paying Obama twice! :x Sorry… this is not a joking situation as I feel the backlog of adjustments will be very time consuming. I truly hope someone here or with the people at POS or Merc have a quick and easy fix for ya. I know it will be worked out…although a pita…but the plus is people are buying and giving your gift cards! :!:
I now find myself feeling less than brite since I forgot gift certs are not taxed only when the money is used. Now that said would it surprise me to see an executive order taxing the purchase of plastic used in gift card productios? Dang…look what they are doing to Gibson Guitar! :shock:
Since I don’t use gift cards or MPS this is only information that I have seen used at other merchants locations and from my schooling in accounting.
In the event of a gift card being used you should consider it to be a refund of the purchase of the gift card and the purchase of products will be a new sale. So the money trail is like this:
Cash----->Gift Card (prepaid Sales)------>Cash----->Purchase of product
Two ways to go about it that keep you square with the tax man (sales tax is where you are more likely to get hung up)
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The gift card or gift certificate is not a sale. It is a deposit and is recorded that way. No sales tax is collected or remitted. The “sale” is made when the card is used. This makes the most sense to me as no goods or services were exchanged. Your book keeper will want to record this as a liability since you now “owe” the goods and services.
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The gift card or certificate is a “sale” and tax is collected and remitted in the period where the card is sold. When the card is redeemed, you enter it as a discount which reduces the amount of the sale at that time.
Talk to your accountant.
Bodegawhy’s first way is the correct way, at least in Washington State and in accordance with accounting rules.
A gift card is not truly a sale, it is only a liability for a sale.
In QuickBooks, I have set up a Gift Certificate (or card) account that is a liability account and have set up the register to not collect sales tax when the certificate is sold. Then when the certificate is redeemed, sales tax is added and collected and the liability account is reduced in QuickBooks.
You’re not doing anything wrong, PoS doesn’t report gift card sales correctly. Like mentioned above, it needs to be squared away on the back office accounting system anyway so it’s never really bothered me much other than my manager console statistics being incorrect when we sell gift cards. Your sales tax should be paid off of your accounting software anyway, not POS. Not sure about everybody else but I have a lot of adjustments that occur between the point of sale numbers and my official books.
It should be handled exactly like Decidion posted, and GAAP requires you to do it in the same manner as Bodegahwy’s first method. In accounting terms, when the GC is sold you debit the Cash account and credit the Gift Card Liability account. When the GC is used you debit the Gift Cart Liability account and credit the Sales account.
As long as you have POS set to not charge sales tax on a gift card sale the sales tax will be handled automatically via your sales tax account. It will correctly show as a sales tax liability on POS reports when the card gets used.
I modified my flash report to remove gift card sales so at least when I run reports I get accurate sales data.
I use point of success and the way I address this problem. I do not deliver, so I classify the gift card as a non-tax delivery charge. That way when I run my sales at the end of the month for sales tax, I know delivery sales are actually gift card and thus not reported.
I guess it depends on where you live. In Washington State, delivery charges are taxable income :roll:
Some gift cards are never redeemed and that can generate unrealized income in the eyes of the tax collector. At some point to you have to account for gift card “breakage”: http://www.giftcardpartners.com/pdfs/ac … -cards.pdf
If gift card haven’t already been covered by the PMQ accounting column, a Plain-English explanation of acceptable ways to handle this would make a nice article!
The “Sales Tax Collected by Product Type” report was designed specifically for this issue. Assign a separate product type to your gift card product code to break out the tax collected (or in this case not collected) for them on the sales tax report.
Defining a gift card Product Category will separate revenue for sales of gift cards from revenue for other sales on the Accountant Summary report. Under the payments grouped by tender of this report you will find your gift card redemptions. You need both the gift card sales and the gift card redemptions to properly account for gift cards. We post the general ledger information properly to QuickBooks for both of these items and we detail it on the report to facilitate use of any accounting system or method.
Mercury Payment Systems also offers gift card reporting to get an overview of your entire gift card program.
Jeff,
Is your system able to handle adding gratuities when using MPS gift cards on deliveries?
Because there is no preauth/postauth transaction available for gift cards the tip needs to be added before the gift card payment is entered or as a separate transaction when the driver returns.
Thanks everyone. I was mostly talking about how it reports on the manager console and I think I understand what I need to adjust. But, it sounds like I could probably adjust the way I account for them in QB to be a little more accurate.