New York gift card rules for restaurants: the nine-year minimum

Gift cards bring cash in early and guests through the door later, and in New York they come with rules. Here is what the General Business Law says and where to check the details. Check General Business Law section 396-i and the Abandoned Property Law with your accountant or lawyer, and note that older summaries often still say five years.

How long must a New York gift card last?

The official text of General Business Law section 396-i makes it unlawful to sell or issue a gift certificate, other than a promotional one, where the underlying funds are subject to an expiration date, unless that date is not earlier than the later of nine years after issuance or the date the funds were last loaded. New York extended the minimum term from five years to nine when it brought its law into line with the federal CARD Act in 2016. Several bills have proposed to prohibit expiry altogether, so check the current status on the State Senate's site. The safest approach is to follow the nine-year minimum and consider issuing cards that do not expire, which is simpler and builds trust.

Should you post your terms?

Put the expiry date if there is one, any fees and the redemption rules on the card, on the receipt and on a sign at the register, and include the terms on your website for online sales. Plain language is better than legalese, and a customer who understands the card is less likely to complain. Ask your lawyer which terms the law requires you to show.

Can you charge fees?

State and federal law both limit fees on gift cards, and the rules on dormancy and service fees are detailed. The simplest policy for a restaurant is to charge no fees at all. Do not charge for replacing a lost card, or deduct any fee from a balance, without checking the current rules with a lawyer.

What about unclaimed property?

If your cards are not redeemed, you may have to report and turn over some balances to the state after a dormancy period. Ask your accountant how to treat outstanding cards, check the Abandoned Property Law, and keep a clear record of sales and redemptions.

How does sales tax apply?

Ask your accountant and the New York State Department of Taxation and Finance how to treat a card sale and a redemption. Make sure your point of sale system records a card sale as a liability, and applies sales tax according to that advice when the guest buys a meal. If you offer promotional cards, ask your accountant how they should be treated. Do not guess.

What should you do if you close or sell the business?

Outstanding cards are obligations to your customers. If you close, tell a lawyer first. Think about honoring cards, offering refunds, or arranging for another business to take them. A buyer should agree in writing whether to honor existing cards. Customers who lose money can complain to the state, and the story can damage your reputation.

How do you reduce fraud?

Sell cards at the register or through a trusted online provider, and limit large bulk purchases without verification. Record card numbers and activations. Teach staff to check a card's balance before accepting it. Beware of scams where someone asks you to buy cards for them or to read card numbers over the phone.

How can you use cards to grow?

Promote cards at the holidays, offer them online, and make them easy to buy. A modest bonus card, such as an extra card with a larger purchase, can lift sales, but state the terms clearly. Follow up with a thank-you message to those who redeem, and encourage them to return with friends.

Setting up your cards

Choose between a plastic or paper card, an electronic card or both. For plastic and paper, print the issue date and the terms. For electronic cards, make sure the email and the receipt show the terms, the balance and the expiry. Test the whole process: buy a card, redeem it in part, check the balance and redeem the rest. Make sure your point of sale system knows how to handle partial redemptions and tips. Write a short staff guide on selling and accepting cards, and on what to do if a card does not work.

How to handle card problems

When a guest brings an old card, check your records and your terms. If the card is inside the minimum term the law requires, honor it. If it is older, consider honoring it anyway as goodwill, since the cost is small and the story is good. If a card is lost, ask if the guest has a receipt or an email, and consider issuing a replacement. Document each decision, and review the log each quarter to see whether your terms need to be clearer. A calm, generous response to a card problem often earns a regular guest and a good review. Keep a small float of goodwill: a manager who can say yes on the spot, without calling the owner, turns a problem into a story guests tell friends.

More guides for your business:

• New York sales tax on restaurant meals, tips and service charges
• New York weekly pay rule for restaurant cooks and manual workers
• How to get more customers to a restaurant in upstate New York

More in the US guides for food businesses.