Revenue Finds Gift Certificates "Resale" and Therefore Exempt from Tax

Taxpayer protests the imposition of use tax on its purchases of gift certificates from the corporate office during the tax years 2008, 2009, 2010, and 2011. The Department based its determination that the gift certificates were subject to use tax on the understanding that Taxpayer used the gift certificates as a marketing tool to increase sales. Taxpayer states that the gift certificates were purchased from the corporate office at the stated amount on the certificate for resale. Also, Taxpayer states that the gift certificates were sold to the end consumer at the stated amount with no mark-up.
…

IC § 6-2.5-5-8(b), provides in relevant part:

Transactions involving tangible personal property other than a new motor vehicle are exempt from the state gross retail tax if the person acquiring the property acquires it for resale, rental, or leasing in the ordinary course of the person's business without changing the form of the property.

In the course of the protest process, Taxpayer provided documentation supporting its position that the gift certificates were purchased from the corporate office at the stated amount and were sold to the end consumer for the same stated amount. Also, Taxpayer states that sales tax was paid by the corporate office for the materials used to manufacture the gift certificates. After a review of the documentation, Taxpayer has established that the sales in question were for resale and so were eligible for the exemption provided under IC § 6-2.5-5-8(b). Taxpayer has met the burden of proving the imposition of use tax on its purchases of gift certificates incorrect, as required by IC § 6-8.1-5-1(c).

http://www.in.gov/legislative/iac/20120725-IR-045120425NRA.xml.html