Like most people, you probably do your holiday shopping at Walmart. And like most people, you probably use gift cards to help with holiday shopping. But many people need to learn that Walmart charges tax on gift cards. That’s right; if you purchase a $100 gift card from Walmart, you will be charged $105.40. That includes the 8% sales tax Walmart charges on all purchases made in Texas.
So if you plan on holiday shopping at Walmart this year, be sure to factor in the cost of taxes when purchasing your gift cards.
Is It Illegal to Charge Tax on Gift Cards?
You have at least one gift card in a drawer, like most people. And if you’re like most people, you don’t know that it’s illegal to charge tax on gift cards in many states. Yes, that’s right – it is illegal to charge tax on gift cards in 42 states and the District of Columbia.
The only states where it is legal to charge tax on gift cards are Alabama, Arkansas, Colorado, Connecticut, Florida, Georgia, Hawaii, Idaho, Illinois, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi Missouri Nebraska Nevada New Jersey New Mexico North Carolina Oklahoma Pennsylvania Rhode Island South Dakota Tennessee Texas Vermont Virginia Washington West Virginia Wisconsin Wyoming.
So what does this mean for you? If you live in one of the 42 states where it is illegal to charge tax on gift cards (or D.C.), you can get a refund on any taxes charged on your gift card. For example, let’s say you bought a $50 gift card from a store in California (where it is legal to charge tax on gift cards). However, when you went to use the card, you were charged $5 in taxes (10% of the card’s value), making your total purchase $55. You can ask for a refund of those taxes from the store. Of course, not all stores will be willing to give you a refund, so it’s always best to ask before purchasing. But it’s worth checking if you think you’ve been unfairly taxed on your gifted funds!
Is There Tax on Gift Cards at Walmart?
No, there is no tax on gift cards at Walmart. However, if you purchase a gift card for someone else, you may be responsible for paying taxes on the card’s value.
Do I Have to Pay Taxes on Gift Cards?
Yes, you have to pay taxes on gift cards. The Internal Revenue Service (IRS) considers gift cards taxable income. That means if you receive a $50 gift card, you will pay taxes on that $50.
Gift cards are considered taxable income because they can be used as cash. When you use a gift card to buy something, you essentially use the money given to you as a gift. The IRS considers any money that is given to you as taxable income. That includes gifts, inheritances, and lottery winnings. So, if you receive a $100 inheritance from your grandparents, you must pay taxes on that $100. If you win $1,000 in the lottery, you will have to pay taxes on that $1,000.
Gift cards are subject to the same rules as other forms of income. That means if you earn interest on your gift card balance, that interest is considered taxable income. For example, let’s say you have a $100 Visa gift card with an annual percentage yield (APY) of 1%. After one year, your balance would grow to $101 because of the interest earned. You must pay taxes on that additional $1 of interest income. Some people try to avoid paying taxes on their gifts by asking for non-cash gifts instead.
But the IRS still considers those gifts to be taxable income. So if your aunt gives you a new car for your birthday instead of a check or cash, you will still have to pay taxes on the car’s value. The same goes for other types of non-cash gifts like jewelry or artwork. The best way to avoid paying taxes on your gifts is not to accept them in the first place. But if someone insists on giving you a gift card or another taxable gift, just be aware that Uncle Sam will eventually want his share too!
Finally
No, Walmart does not charge tax on gift cards. This is because gift cards are considered to be non-taxable items.
