Gift Card Escheatment, Stored-Value Breakage & Domicile Risk
Retailers and SaaS/hospitality brands routinely book gift card breakage into GAAP revenue—only to discover that unaddressed cards escheat 100% of remaining face value to their State of Incorporation under Second-Priority rules.
Standard Dormancy: Exempt in FL, AZ, CA, TX (qualified); 5 yrs Full Face Value in DE & NYThe Second-Priority Gift Card Domicile Trap
Under Texas v. New Jersey, if a retailer does not capture the cardholder's billing address at point of sale, the First-Priority rule cannot apply. Instead, 100% of unredeemed stored-value cards escheat to the issuing entity's State of Incorporation under Second Priority.
If the issuer is a Delaware corporation or LLC, Delaware enforces a 5-year dormancy period on unredeemed gift cards—requiring remittance of the card's remaining face value (reduced only by the merchant's documented cost-of-goods-sold / profit margin rules only where structured properly via a separate Giftco entity prior to dormancy, not retroactively).