What's the difference between a single-purpose gift certificate and a multi-purpose gift certificate?
You can sell Gift Certificates to customers that can be redeemed for products and services in your WooCommerce store. There are two types of gift certificates: single-purpose and multi-purpose. This article will help you understand the differences between each gift certificate type and decide which type of gift certificate you should create.
Single-purpose gift certificates are gift certificates that are associated with and redeemable for a specific product or service only. The gift certificate redemption offsets 100% of the product, even if the gift certificate itself is sold for less than the redemption product's cost. We recommend ensuring that your single-purpose gift certificate uses the same tax class as the products it can be used on, since redeeming a single-purpose gift certificate will offset 100% of the product price, even if it’s more.
Multi-purpose gift certificates are gift certificates that are redeemable for any product in your store. These gift certificates offset the cart total and can be thought of as being used like a gift card. If only part of the gift certificate's value is used, it is considered partially redeemed and can be used again at a later date.
Disclaimer: If you’re not sure whether a gift certificate should be taxed at purchase or not, please consult your tax attorney or accountant. Our documentation can help guide your decisions around gift certificate taxation, but tax compliance is your responsibility as a merchant. Please be careful to choose the right options for your store.
The key differences between single-purpose and multi-purpose gift certificates are outlined in the following table:
|Single-purpose gift certificate||Multi-purpose gift certificate|
|Redeemable for||A single product (good or service).||Any product (good or service).|
|Redemption amount||100% of the product price that the gift certificate is being redeemed for; the gift certificate is applied to the highest priced item eligible for redemption regardless of the gift certificate's value.||Same as the gift certificate amount / cost of the gift certificate.|
|When is gift certificate applied?||To the product price, before taxes are calculated on the product.||To the cart total. The order total (after taxes) is offset by the gift certificate value.|
|When are taxes incurred?||When the gift certificate is purchased.||When the gift certificate is redeemed.|
|Taxability of gift certificate purchase||Gift certificate purchaser pays taxes on the gift certificate product since the associated redemption product has a known tax class. Ensure the gift certificate price matches the redemption product price to collect the same tax.||Gift certificate purchaser pays no tax on the gift certificate product when purchased, similar to buying a gift card.|
|Taxability of gift certificate redemption||When redeeming a gift certificate, the gift certificate will first offset 100% of the product price. If multiple eligible redemption products are in the cart, the gift certificate will offset the product with the highest price!
Then, taxes will be assessed on the subtotal of the order after the gift certificate has been applied.
If a customer checks out online with only one redemption product in the cart, no taxes will be assessed since the order subtotal is $0.
|When redeeming a gift certificate, the gift certificate recipient will pay tax on the order subtotal first. Then, the gift certificate amount is deducted from the total (subtotal plus tax).|
|Shipping||Shipping cost is excluded; any shipping fees would be paid by the gift certificate recipient when redeeming a gift certificate.||Shipping cost is excluded; any shipping fees would be paid by the gift certificate recipient when redeeming a gift certificate.|