Article
Six keys to managing gift card escheatment risk
A practical guide for companies that issue gift cards, gift certificates and other stored-value products
May 29, 2026 · Authored by Matthew Chenowth and Steven Swaigenbaum
Gift cards are more than a customer engagement tool. For issuers, they can also create complex unclaimed property compliance and accounting obligations. When a gift card, gift certificate or similar stored-value product remains unused, the remaining balance may be subject to state escheatment rules.
Effective compliance starts with a few simple questions: Which state has jurisdiction? Does the product qualify for an exemption? What amount, if any, must be reported? Can the company's records support the position taken if challenged by a state?
The following six keys can help companies that issue gift cards assess exposure, strengthen processes and reduce audit risk.
1. Start with the priority rules
The first step is determining which state has jurisdiction over the potential unclaimed property obligation. In general, unclaimed property is reportable first to the state of the owner's last known address, as reflected in the holder's books and records. If no address is available, the property is generally reportable to the holder's state of corporate domicile, such as the state of incorporation or formation.
This matters for gift card programs because many issuers do not collect address information at purchase or redemption. When no owner address exists, unused balances may default to the issuer's state of domicile, where the applicable rules may be more or less favorable than the rules in states where cards are sold or used.
2. Know the laws that apply to your specific program
Gift card rules are highly state-specific. A product that is exempt or treated favorably in one state may be reportable in another. Companies should analyze both the legal definitions and the operational features of the program, including:
- Is the product labeled a gift card, gift certificate, stored-value card or another type of instrument?
- Does the card expire or is it subject to dormancy, service or administrative fees?
- Can the card be exchanged for cash, reloaded or used with unaffiliated merchants?
- Is the card issued in physical, digital, promotional, loyalty or co-branded form?
Many states exempt certain gift cards from escheatment, most often in cases where the card does not expire and is not subject to dormancy fees. Some states also allow partial-reporting or deduction rules that permit a holder to retain a portion of the unused value. These positions should be documented carefully. A reporting exemption may eliminate the obligation to remit funds to a state, but it does not necessarily eliminate the company's obligation to honor the card for the customer.
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The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.