I'm a photographer, not an accountant, so this article is based on the tax advice that I've received for Karen Lisa Artistic Photography and may not apply to your studio. As always, consult with an accountant or tax professional on issues such as this; this article is intended for those with similar requirements as mine.

When a client buys a Gift Certificate, I create a product for it. In this particular case my gift certificate is $250 and includes a session and an 8x10 print. Who ever buys the gift certificate would pay the $250 exactly since you don't pay tax on the GC itself (at least not in Florida).

Selling the GC is like selling any other non-taxable item so we won't review that here.

After you sell the GC, somebody will eventually redeem it. For tax purposes, redeeming a GC tends to be the same as cash, in which case you'd have to collect tax on the items being purchased (which should be familiar to anybody who has redeemed a gift card after the holidays). I personally like to just have the person redeem the certificate and be done with though, so you have to take other measures to get the balance to even out correctly while still recording the appropriate sales tax so it appears in your Tax Liability Report. If you're in the same position as me, this is how to record it in Táve.

Create your quote for your client who is redeeming the GC. Add the session to the quote (in this case the value is $250). Then create a new manual entry (see screen shot) and make it a negative amount for the entire amount including tax (in this case -$265).

Note that the actual portrait session that the client redeeming the certificate is purchasing IS taxable. Hope you're not confused  yet. ;)

The Redeemed Gift Certificate should NOT be marked as Taxable - since you want to make sure your tax section stays in tact!

Then it evens out to $0 and still posts the tax to your Sales Tax Liability Report so you will be correct on your taxes.

If you'd like to have a better understanding of how much has been redeemed and/or how much sales tax you've paid on behalf of clients, you can use actual products instead of manual entry items. I'd suggest going into settings and adding a new product type, such as "Financial", to group the products together and away from the actual GCs in your product list. If you're tracking how much tax you've credited, in the example above you'd have the "Redeemed Gift Certificate" product priced at -250 and a "Sales Tax Credit" product priced at -15.

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Here is a run down of what should be listed as taxable and what should not in case you didn't catch it the first time.

Gift certificate product: NOT taxable
Gift Certificate Session that is being redeemed by your new client - TAXABLE
"Redeemed" Gift Certificate: NOT taxable