On July 15, 2020, New York State Senator Shelley Mayer introduced a new bill that would change how gift cards are sold in New York.
On July 23, 2020, SB 8780 passed the Senate and has been sent to the Assembly for their debate.
Fees Would Be Prohibited
Senate Bill 8780 would prohibit most fees associated with closed-loop gift cards, including activation, redemption, monthly, dormancy, latency, administrative, access, re-loading fees (and quite a few more similar fees).
This would change the 2016 law that changed the time from 13 to 25 months before a fee could be imposed.
Open-loop gift cards (those branded with Visa, AMEX, or similar banks that are redeemable wherever credit cards are taken) would be able to charge an initial one-time activation or issuance fee. The fee could not be greater than $4 or 5% of the face value of the card, whichever is less.
Expiration Dates on New York Gift Cards
The New York Senate Bill would also prohibit expiration dates on gift cards, except for promotional cards. If the New York promotional card has an expiration date, then such expiration date shall be clearly and conspicuously stated.
Previously, New York had moved to a five year expiration date to align with the CARD Act in the same 2016 amendments.
New Cash Redemption Requirement for New York Gift Cards
If Senate Bill 8780 passes, there would be a new cash back requirement for de minimis balance cards.
Under this bill, if a card has a remaining value of less than $5, then the balance may be redeemed upon request by the card owner.
What About Groupon Type Programs in New York?
SB 8780 would exclude certain promotional cards or programs, such as Groupon, when the card is used “to purchase identified goods or services at a price or percentage below the normal and customary price; provided that ANY expiration date of the prepaid discount card or program is clearly and conspicuously disclosed.”
This exclusion is found in the definition portion of the bill, when defining gift certificate (which also includes electronic cards and records). Other exclusions include debit cards connected to bank accounts, payroll cards, HSA cards, prepaid telephone calling cards, and similar cards.
What About Taxes on NY Gift Cards?
Earlier this legislative session, Garbarino introduced Assembly Bill 4801 on February 5, 2019. The bill is currently in the Ways and Means Committee.
AB 4801 would specifically exclude gift cards from sales and use taxes in New York.
This is the same bill that stalled in the Ways and Means Committee each of the last two sessions. Thus, I’m not expecting much further movement on AB 4801.
Stay Tuned for More New York Gift Card Developments
2020 has been the year of the gift card. Many retailers and business groups are promoting gift cards as a means of supporting local businesses during closures as well as to reduce the need for cash transactions.
If you are interested in implementing a gift card program for your business, it is wise to get counsel so that you are implementing the program correctly and can avoid issues down the road. Including potential class-action lawsuits for not complying with cash back requirements.
Recent coverage on gift cards include:
Overstock.com Wins Appeal of False Claims Gift Card Case
Is Braille Required on Gift Cards? Court Says No
Maine Gift Cards to Be Exempt by 2022