Student Brett Nothstein of Newark, Del., recently found the $50 gift card he received for Christmas two years ago, but it had expired.

        “I usually use gift certificates as soon as I get them,” he said of his forgotten gift card from a music store. “I don't know. I guess this one just kind of slipped through.”

        Like so many others who thought his money was lost to the retailer, Mr. Nothstein was pleased to learn his unredeemed present still may be worth something — either to him or the government.

        Gift-certificate sales are estimated at more than $30 billion annually, said Dan Horne, a business professor at Providence College in Rhode Island who has researched gift certificates.

        Between 4 percent and 10 percent never are redeemed, Mr. Horne said. That's the equivalent of $1.2 billion to $3 billion.

Source of revenue

        Most shoppers believe the expired certificates become profit for retailers. But several state laws require businesses to turn the money over to the state as abandoned property.

        That can mean big money to state governments. Delaware estimates it collected $11 million worth of unclaimed gift certificates last year through the abandoned property law, also known as the escheat law. Because so many companies are incorporated in Delaware, the state is eligible for millions in unredeemed gift certificates, Mr. Horne said.

        Some retailers oppose enforcement of such laws, arguing that the expired gift certificate has no value and that the money belongs to the merchant who sold it.

        Gift certificates are one of the top 10 most popular gifts during the holidays, according to the National Retail Federation, a Washington-based trade association.

        Gift certificate sales have grown by more than 20 percent during the past three to four years, according to a study by International Communications Research for GiftCertificates.com, a Web site that sells certificates for various retailers.

        On average, a customer will spend 40 percent more than the gift card's value when he redeems it, industry experts said.

        Until about five years ago, most states did not aggressively enforce escheat laws, Mr. Horne said. That has changed as governments realized the revenue potential.

State laws vary

        State governments deal with unclaimed property in different ways. Mr. Horne said there are 35 different escheat laws in the 50 states.

        “It's extremely confusing and in a lot of states, what happens with gift certificates is not settled,” he said.

        Some states, including New Jersey and Virginia, specifically exclude gift certificates from the unclaimed property law, he said. California law does not allow gift certificates to expire. Therefore, the state can't collect what goes unclaimed, he said.

        Mr. Horne predicts state officials will increase collection efforts to make up for tighter state budgets. But Michael Strine, Delaware's assistant secretary of finance, said the money owed to states might actually dwindle.

        “As corporate America becomes more aware of the escheat issue, they will take steps to have less unredeemed certificates,” he said.

        Some retailers have contested state laws in court or lobbied state officials to change the law so they can keep the money.

        But most retailers rarely know if gift certificates are used, said Sarah Scheuer, a spokeswoman for the National Retail Federation.

        “That is not where retailers are trying to make their profits,” Ms. Scheuer said. “Retailers are using those cards to get people in their stores.”

        Last year, the Christiana Mall in Delaware sold about $5.1 million in mall gift certificates, said Moffat Welsh, mall spokeswoman.

        Mall managers will honor gift certificates despite the expiration date, Ms. Welsh said. The mall keeps a separate bank account for gift certificates sales.

        Most certificates are redeemed, so the account is “pretty much empty,” Ms. Welsh said. “The account closes itself down and whatever is left, you know it is going to be claimed and you write a check to the government.”

Ask for an extension

        Several retailers refused to comment on their gift-certificate policies.

        Experts recommend that shoppers such as Mr. Nothstein who find lost gift certificates ask the retailer to honor the gift. If it refuses, attempt to explain the abandoned property law and mention that the state government could request the money later.

        Retail experts said most merchants will honor such a gift certificate knowing that the customer is likely to spend more money at the store.

        Mr. Nothstein said he would give it a try. The $50 certificate, he said, represents “a good amount of money.”

Office towers: No sale
End of the shoemakers
This 1913 tractor right at home
Cincinnati, other Ohio cities will lose CVS drugstores
Unused gift card claimed by states
Tristate Summary
What's the Buzz?