Gift Card

Policy

Departments may utilize gift cards for employees and nonemployees with the establishment of departmental policies that address program parameters, IRS regulations, custodianship, inventory tracking, and approvals processes.  Gift cards shall not be used as a method of payment for the purchase of good and services.

Definitions

• Gift Card – a physical or virtual card that can be exchanged for a specified value of goods or services from a retailer(s).  The IRS deems gift cards a cash-equivalent.  

Program Parameters

• Purpose. The utilization of gift cards shall comply with all state and federal regulations and shall be limited to purposes that benefit the state and its programs.  
• Card Limits. A per card maximum amount shall be established.  Limits may be established at a department-wide, division, or program level.
• Distribution. A maximum timeframe from the purchase to the distribution of gift cards shall be established to meet program needs while minimizing inventory on hand.  The distribution of gift cards shall be witnessed by a second individual, or other compensating controls established to ensure that gift cards are only distributed to authorized recipients.
• Controls. Internal controls shall be established for the random and/or periodic independent review of gift card activity.

IRS Compliance

• Gift cards, as a cash-equivalent, are generally taxable.  Departments must determine taxability prior to the distribution of cards.
  • Employees.  Gift cards are not de minimis in any amount and shall be reported on the employee’s W-2 as taxable income. See also De Minimis Fringe Benefits and Achievement Awards Technical Guidance.
  • Non-employees.  Departments shall track all taxable non-employee gift card recipient information falling under the State’s XX-XXX4739 Taxpayer Identification Number as directed by the State Controller in the Fiscal Procedures Manual and the CORE Federal Tax Reporting Guide.
• Recipient Notification. Departments shall notify recipients of the potential tax implications, if any, of accepting gift cards.

Custodianship and Inventory Tracking

• An individual shall be designated to act as the Custodian responsible for the gift cards.  
• The Custodian shall ensure that physical gift cards are stored in a secure location.  This applies to in-office and remote work locations.  
• The Custodian shall maintain a log of gift cards:
  • Purchases.  Include items such as the date of purchase, merchant, number of cards, card identification number, and denomination.
  • Distributions.  Include items such as the related card information, date of distribution, name of recipient, and recipient signature or receipt acknowledgement.
• The Custodian shall reconcile gift cards authorized to amounts distributed and remaining on hand no less than quarterly, and maintain that for audit purposes.  The Custodian is personally liable for unaccounted for gift cards.

Approval Process

• The purchase of gift cards must be approved by an authorized representative prior to purchase.

 State Controller Policies

• View Policies & Guidance
• View Contract Policies