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I will be opening up a gift card website by the end of this

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month. I will technically be...
I will be opening up a gift card website by the end of this month. I will technically be the 3rd party servicer for a grocery store in Mexico. My website will sell gift cards and charge a $10 processing fee for every transaction (maintaince of the website). I don't know how to go about separating the $10 (earned income) from the gift card $ amount when doing taxes.
Submitted: 1 year ago.Category: Tax
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10/3/2016
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 1 year ago
Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
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Hi, my name is Mark. I will be happy to help you with your questions. So you are selling gift cards for the grocery store in Mexico. If a customer buys a $50 gift card do they pay $50 or $60?

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Customer reply replied 1 year ago
Correct. They would end up paying $60. The $10 processing fee is added at checkout.
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 1 year ago

You would create the following journal entry.

Cash ..... $60

Due to Grocery Store .......... $50

Processing Fee Income......... $10

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Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 1 year ago

A liability would be created for the amount of gift cards that you sell.

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Customer reply replied 1 year ago
Can you go into detail on the liability part?
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 1 year ago

The liability is the amount of money you are holding in trust for the grocery store. So assuming during the month you sold $1,000 of gift cards. This is the amount that you would owe to the grocery store (assuming that there is no fees that the grocery store is required to pay).

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Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 1 year ago

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