New Jersey Restaurant Association- June 18, 2010 DDOWDELL@NJRA.ORG 609.599.3316 Contact: Deborah Dowdell Position Opposing Gift Certificates Escheats & urging a restaurant industry exemption Restaurants typically honor the full value of gift certificates when redeemed regardless of expiration date. Gift Certificate escheating will undermine the restaurant relationship with our patrons. The onerous Red Tape that will result is counterproductive to the State’s broader economic revitalization agenda and will have a greater impact on the restaurant industry, low margin small businesses that relies upon the steady sale and redemption of gift certificates during the course of business. Restaurants oppose gift certificate escheating and at the very least seek a restaurant industry exemption. It is reasonable to replace this revenue by projecting additional sales tax revenues that will result from increased consumer confidence and a more positive corporate outlook resulting from Governor Christie’s policies to stimulate the economy. Further it is our understanding that companies domiciled outside of NJ are not subject to escheat laws meaning the target of this proposal will be small businesses struggling to rebound during this economy. The Governor’s 2010-2011 budget proposes $28.5 million ($3.5 million per year thereafter) in revenue from escheating gift certificates not redeemed after 12 months to the State of NJ. This will require specific legislation to define gift certificates as unclaimed property if not redeemed after 12 months. Because restaurants typically will honor the full value of gift certificates presented at anytime regardless of expiration dates NJ Restaurant Association adamantly opposes this proposed policy which will interfere with the private transaction between businesses and individuals and undermining our relationship with our patrons. Further, requiring small businesses to escheat gift certificates or gift cards to the State seems counter-intuitive to NJ’s vision to become more business-friendly with less Red Tape. Current law requires that gift cards and gift certificates must be valid for 24 months. Gift cards may charge a “dormancy fee” of up to $2 per month beginning the 25th month. If the goal of this proposal is to protect consumers, we argue that restaurants should be exempted as it is common practice in the restaurant industry to honor gift certificates at anytime and as most restaurants issue paper certificates, they do not assess dormancy fees. While some states have varying escheating laws on their books, we submit these laws were initiated prior to the current economic downturn. All eyes are on New Jersey for innovative public policy that eliminates Red Tape and reduces the corporate and personal tax burden as a way to grow our economy and create private sector jobs. According to the NCSL website, Colorado exempts gift certificates redeemable for food and beverage apparently recognizing the specific hardship this would cause the low margin restaurant industry and recognizing the impact of the volume of sales and redemption that occurs in restaurants. Other states that exempt gift certificate escheats include: AZ, AK, CA, CO, CT, FL, ID, IN, KS, KY, MD, MN, NB, ND, OH, OR, RI, SC, VT, and WI. The New Jersey Restaurant Association supports our lawmakers’ efforts to balance the state budget and help bolster the New Jersey economy. Yet placing these onerous administrative burdens on restaurant owners- as well as other small businesses- is counterproductive, and will actually work against Trenton’s broader economic revitalization agenda.
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