It seems as though I get a “special offer” every day from Amazon that allows me to purchase goods or services in my local area at steep discounts. Today it was car detailing; yesterday it was skin care services – both half off. Each time, the offer requires me to purchase a voucher, redeemable for the service or product at the “special price.” I haven’t purchased a voucher yet, but I have occasionally thought that at such a steep discount, it wouldn’t be so bad if I did purchase and then not use the voucher. I’m sure that the local vendor thinks along similar lines – that they get advertising value from the offer and some percentage of voucher purchasers won’t use the service or pick-up the product.
It turns out that we are all wrong. I recently read an article called “Online ‘Daily Deals’ Hold Hidden Traps For Unwary Retailers, Practitioner Says” by Dolores Gregory in the BNA Daily Tax Report that discusses hidden traps in that type of transaction for the local vendor. Apparently, un-redeemed vouchers may be “unclaimed property” under state law. “Unclaimed property,” if not claimed within the statutory period, becomes the property of the state through a legal process called “escheat.” The following is an explanation of the two traps in the transaction that arise from this law:
- Many vendors do not realize that they have to account for unclaimed property (i.e., the un-redeemed vouchers), and report it periodically to the appropriate state agency.
- The vendor usually shares the revenue from selling the voucher with the website owner who sponsored the advertisement to the buyer. Since most of these offers have “small print” in the agreements that make the local vendor the holder of the unredeemed vouchers, the vendor eventually has to pay the state due to escheat of the offer. Thus, the vendor will have to pay the state the entire amount of the voucher, even though the vendor shared the revenues with the website.
So… let’s say the price of a voucher was $50 and the vendor and website owner split that equally ($25 each) when one is bought. However, when a buyer of the voucher doesn’t redeem the special offer, the vendor then has to pay the state $50 and incur a loss of $25. Looking at the transaction this way, the special offer is a real deal for the website and potentially a real bad deal for the vendor. If you happen to be a business owner that is considering the issue of a special deal to spur sales, you might want to get very familiar with your state’s unclaimed property law first. On the other hand, if you happen to have bought a voucher and let it lapse in the state of Washington, you might want to see if it landed on the state’s unclaimed property list and stake your claim.