Accountants call the sale of a GC, a sale. A sale is a sale. If it never gets redeemed, it's a sale, not a debit. It should get an order number.
Redeeming a GC is an exchange, neither a sale nor a debit. The mechant recovers the GC and delivers a product of equal value. That's an exchange, not another sale. BVC has it wrong if remeeding a GC counts as another sale. How does Quickbooks log it?
The IRS counts the sale of a GC as a sale, and the money as income the year it was earned unless deferred under certain rules. Generally, unless an accrual-basis taxpayer follows the deferral rules under Treas. Reg. § 1.451-5, gift card/gift certificate income must be reported when received. Cash basis taxpayers cannot defer the sale.
The rules control taxes due in the event a business sells a GC and then goes out of business. The proceeds are income when the GC is sold.
Note the terms below "immediately" and "deferral rules", and the use of the word "sale".
From:
http://www.irs.gov/businesses/article/0,,id=170842,00.html The popularity of gift cards has increased at a remarkable rate in recent years. The sale of a gift card, however, is not immediately recognized as income for financial reporting purposes. Similarly, under certain circumstances, the sale of a gift card may be deferred from immediate income recognition for tax reporting purposes. Generally, unless an accrual-basis taxpayer follows the deferral rules under Treas. Reg. § 1.451-5, gift card/gift certificate income must be reported when received. (Rev. Proc. 2004-34, 2004-1 C.B. 991, allowing a one-year deferral, may also apply in certain circumstances). To the extent that a taxpayer is appropriately using the deferral rules of Reg. § 1.451-5, unredeemed gift card income may be deferred up to the last day of the second taxable year following the year of the sale. Deferral for tax purposes cannot be later than it is for financial accounting purposes, and the taxpayer must have on hand enough goods to satisfy the outstanding gift cards/certificates. The regulations generally provide deferral related to goods and not services. However, Rev. Proc. 2004-34 allowing a one-year deferral may be elected in certain circumstances and applies to the sale of goods, services, and mixtures of goods and services.
From:
http://www.irs.gov/businesses/article/0,,id=187523,00.html Gift cards versus gift certificates: Are gift cards the same as gift certificates for purposes of Treas. Reg. § 1.451-5?
The Regulations, which were first issued in 1971, specify gift certificates only because gift cards were not in existence at that time. Gift cards are essentially an electronic version of gift certificates with a few enhancements such as the ability to reload or add value to the gift cards. Most states have statutory definitions of gift certificates and gift cards and the two are generally interchangeable. If a taxpayer treats gift cards differently from gift certificates for purposes of Treas. Reg. §1.451-5, the issue needs to be brought to the attention of one of the Retail or Food & Beverage technical advisors.