The Fine Print this Holiday Season: How States Tax Gift Certificates

As holiday shopping picks up, many businesses and organizations turn to gift cards and certificates as a simple way to say, “thank you.” But when it comes to sales tax, timing matters — and the rules can vary from state to state. Here’s a quick summary of how eight states treat the sale and redemption of gift certificates in 2025. 

Gift Certificates are typically treated as cash and redeemable for anything in a store. A card that is valid for a specific quantity of an item is likely to be considered a prepaid sale of that item rather than a gift certificate. 

Below are snippets from each state’s publication. 

Iowa: Coupon books and gift certificates are exempt from tax at the time they are purchased. Tax is due at the time the coupon or certificate is redeemed by the customer. 

Minnesota: The sale of gift cards and certificates are not taxable. Treat them like cash. If the gift card or certificate is redeemed for taxable goods or services, charge sales tax on the full sales price before subtracting the gift card or certificate amount. 

North Carolina: Charges by retailers for gift certificates and gift cards that can be redeemed for items are not subject to sales and use tax at the point of sale. When the holder of such gift certificate or gift card redeems the gift certificate or gift card for items, the transaction is subject to the applicable rates of sales and use tax. 

North Dakota: A meal ticket or gift certificate is not subject to sales tax when it is sold to the consumer. Sales tax is added when the meals or merchandise are purchased. 

Nebraska: The sale of gift certificates, promotional certificates, or vouchers is not taxable. …When gift certificates, promotional certificates, or vouchers are redeemed in whole or in part, they are treated as if cash were used up to the face value of the certificate. 

South Dakota: No sales tax should be charged on gift certificates at the time the gift certificate is sold. Tax should be charged on items purchased with a gift certificate. 

Texas: Tax is not due on the sale of a gift card or gift certificate. The tax is to be computed on the sales price of the meal and collected at the time the gift certificate is redeemed. 

Wisconsin: The sale of a gift certificate or gift card (i.e., certificate or card that indicates a certain amount that the bearer can use as cash) is not subject to Wisconsin sales or use tax. When the gift certificate is redeemed, the applicable sales tax will be computed. 

In short, the sale of a gift card typically isn’t taxable—but redemption can be. Because each state defines it a little differently, it’s worth checking official guidance to be sure.

If you’d like clarity before year-end, our team at Brady Martz is here to help.