Starbucks Gift Cards for Business PromotionTax Planning
To stay in touch and promote my business, I buy dozens and dozens of Starbucks $5 gift cards and send them monthly to my prospects and referral sources. Can I write off the $5 cards?
You’ve probably heard the expression “between a rock and a hard place.” That’s where your Starbucks gift cards fall. The law is going to treat your $5 Starbucks cards as business gifts.
Thus, if you give a card to a referral source every month, your cost is $60 for the year ($5 x 12), but you may not deduct more than $25 for business gifts made to the same person.
When you see the $4 exception to the gift rules, you will want to eat nails. The law exempts from the business gift rules and calls it advertising when you give to a customer or a prospect an item
- that costs you $4 or less,
- on which you have your name clearly and permanently imprinted, and
- that is one of a number of identical items distributed generally by you.
Keep in mind that the $4 rule was enacted in 1962,2 many years before Starbucks came into being. Further, if we applied the consumer price index calculator to that $4 amount, it would inflate to $39 today. The $25 total gift amount inflates to $241.
You might consider the complaint route. Both the $4 and $25 limits are out of touch and absurd. They need changes to account for inflation and changes in society. People who deserve your complaints include your
- U.S. senators,
- U. S. congressional representatives, and
- trade associations.