Gift cards and comp cards: What’s the difference? Plenty. Failure to account for the differences results in significant financial consequences.
A gift card is sold to guests and therefore represents taxable revenue. The value of a gift card appears on the balance sheet as a liability until redemption.
In contrast, a comp card is given by the restaurant to a guest as a gesture of goodwill or to extend a privilege to an employee. Therefore, the comp value should be recognized as an accounting expense, not as revenue. A comp should appear as a discount that lowers the subtotal of a guest check and reduces the amount of tax associated with the transaction.
Restaurants that ignore these differences incur a “double taxation” penalty. They overstate their income and sales tax liability and must endure an inflated tax burden.
Paytronix provides integrated solutions designed to properly account for the accounting intricacies of gift card and comp card programs. Learn more about managing your comp programs.