Ask Axios: Why did Black Cat Ice Cream charge tax on a gift card?

• "A $10 gift card is $10.70. They have stated to me they don’t charge tax when you redeem the gift card, but they definitely do. Why? Please make it make sense?" — Kaci Kennedy

A: We decided to pursue this (delicious) investigation.

Zoom in: Kennedy said she'd bought gift cards from Black Cat: Once at the old Drake location in 2023, and again last year when the Valley Junction shop opened. She said an employee told her the tax was charged on the gift cards themselves, but not on the ice cream purchased later with the card.

• Linh had a different experience. Earlier this summer, she bought a $10 gift card at the Valley Junction shop.
• She got a cute certificate and was charged exactly $10.

What they said: We reached out to Black Cat Ice Cream owner Alex Carter about the discrepancy.

• In an email, Carter acknowledged that they used to mistakenly charge taxes on gift cards in the past, but no longer do so today.

The big picture: Iowa law says taxes should not be applied to gift cards. Instead, the tax should be applied to the item that's purchased with the gift card.

• John Fuller, spokesperson for the Iowa Department of Revenue, says the state does not keep track of how much money it accidentally earns from wrongly charged gift card sales.

The bottom line: Check your receipts!