My sister sent my son a graduation card, but not a gift. Is it proper etiquette to send a gift? How do I handle this.

It is very poor etiquette to expect a gift. A card is within proper etiquette. As would have been a phone call. Not sure how much money they have, what their budget is, how many other family members if they start sending gifts Or even how close they are. I was never close to my aunt and uncles and don't even think I got even a card from any of them.

I would assume you sent them a granduation invitation, thus they sent a card ?

Also what are they graduating from ? Kindergarten, grade school, high school, college ?

A gift or a present is the transfer of something without the expectation of payment. Gift - Wikipedia, the free encyclopedia

It is something that is voluntary.

YOU don't handle it, your son sends a thank you note or makes a thank you call.

I don't understand what there is to handle. No one is obligated to send a gift. A card should be enough.