# When stores donate charity money collected from customers, do they take a tax deduction? **URL:** \ **Category:** Factual Questions\ **Created:** [January 10, 2017, 5:00pm UTC](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821 "2017-01-10T17:00:03Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![filmore](https://avatars.discourse-cdn.com/v4/letter/f/7993a0/32.png) [@filmore](https://boards.straightdope.com/u/filmore)\ **Post date:** [January 10, 2017, 5:00pm UTC](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821/1 "2017-01-10T17:00:03Z")
Many stores have promotions where they ask customers at the register to donate towards a charity and the store will donate the collected funds. A pet store may be collecting for a dog shelter, a grocery store for a food bank, 7-11 for MS, etc. When the store donates the funds collected from the customers, does the store show that as a charitable deduction on their own taxes? It seems the deduction should only be valid for the customer who gave the funds in the first place, but I could also see the company taking it because of some vague accounting rule. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [January 10, 2017, 5:47pm UTC](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821/2 "2017-01-10T17:47:12Z")
No, Corps get no deduction. It’s purely for goodwill. Note that corps do often spend a lot of $ each year for goodwill, so it’s not like they get nothing. ---
**Author:** ![Clothahump](https://avatars.discourse-cdn.com/v4/letter/c/51bf81/32.png) [@Clothahump](https://boards.straightdope.com/u/Clothahump)\ **Post date:** [January 10, 2017, 6:09pm UTC](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821/3 "2017-01-10T18:09:44Z")
Probably not. I would assume that, for accounting purposes, that money is not registered as a sale, but instead is put in a holding account. Then the money is transferred to the cash account and a check is written to the charity. ---
**Author:** ![GMANCANADA](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/gmancanada/32/2837_2.png) [@GMANCANADA](https://boards.straightdope.com/u/GMANCANADA)\ **Post date:** [January 11, 2017, 1:37am UTC](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821/4 "2017-01-11T01:37:45Z")
In Canada there was a lot of controversy several years ago when it was revealed that some businesses were claiming the deduction as though they had donated the money themselves. It’s now illegal for them to do that. The Canada Revenue Agency (Canada’s IRS) now distinguishes between “making a donation” and “collecting other’s donations”. Businesses are only collecting and since individual donors are not known, no tax receipt is issued. If the business provides “matching funds” donations, they can claim the matching portion only since they are the actual donor. Also related: there are issues where businesses support charities and they say “proceeds from today’s sale of product X go to charity”. In Canada, “proceeds” means the full sale price, but many businesses, either deliberately or through ignorance, think it means “profit” (kind of like “net proceeds”). The CRA is cracking down on that as well since they believe it misleads consumers. ---
**Author:** ![Tired\_and\_Cranky](https://avatars.discourse-cdn.com/v4/letter/t/a87d85/32.png) [@Tired\_and\_Cranky](https://boards.straightdope.com/u/Tired_and_Cranky)\ **Post date:** [January 11, 2017, 3:52pm UTC](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821/5 "2017-01-11T15:52:06Z")
> [@filmore](#): > > When the store donates the funds collected from the customers, does the store show that as a charitable deduction on their own taxes? It seems the deduction should only be valid for the customer who gave the funds in the first place, but I could also see the company taking it because of some vague accounting rule. I’m not 100% sure, but I think the answer is that, due to the ways that Generally Accepted Accounting Principles work, yes the stores take a deduction but only after they have recognized revenue from the donation. Thus, when a store that donates 100% of what it receives, taking and making the donations does not help its earnings, reduce its taxes, or otherwise improve its financial position. It would make its tax return look slightly weird and might have some minor effects at the margins but I think these effects would be trivial. Statement of Financial Accounting Standards No. 116 (PDF: [http://www.fasb.org/resources/ccurl/770/425/fas116.pdf](http://www.fasb.org/resources/ccurl/770/425/fas116.pdf)) requires companies that take donations to recognize revenues or gains from the donation in the period received. This guidance applies to both non-profit organizations and for-profit entities. So when the store gets the money, it has revenue. This would increase its earnings and its tax liabilities. However, the same guidance also requires those entities to book an expense for any unconditional promises to give. Once the store has taken the donation, it has also made an unconditional promise to give to another charity that offsets the revenue. Thus, the donation income is offset by an exactly equal donation expense. In the end, it would have no real effect on income. The balance sheet would similarly show no real effect. First, it would get cash from the donation (increasing assets) but it would also increase liabilities (the donation it owes to the charity). No change in net assets. Then, when it pays the charity, cash would drop (lowering assets) but it would also eliminate its liability (decreasing liabilities). Again, there is no change in net assets. I am assuming that the income tax treatment for these donations is roughly the same as GAAP but I haven’t done the research. I’ve certainly never heard of any tax benefits to for-profit companies for taking these donations and I’ve heard of a lot of sketchy tax dodges. Stores probably take these donations on behalf of charities because: 1. Helping the charities makes the stores seem like good corporate citizens to their customers, which perhaps makes customers more likely to shop there. 2. They can issue a press release about all the contributions they gave even if the money came from their customers. Financial statements must be according to GAAP but press releases aren’t held to the same standards. And, technically, the store really did make the donation. 3. The stores’ executives get warm and fuzzy feelings and public affirmations from the charity when they donate the checks. The executives like to get the invitations to the charity’s donors’ banquets and things. 4. The charity will say nice things about the store, which is effectively free advertising. ---
**Author:** ![filmore](https://avatars.discourse-cdn.com/v4/letter/f/7993a0/32.png) [@filmore](https://boards.straightdope.com/u/filmore)\ **Post date:** [January 11, 2017, 4:17pm UTC](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821/6 "2017-01-11T16:17:23Z")
> [@Tired\_and\_Cranky](#): > > The balance sheet would similarly show no real effect. First, it would get cash from the donation (increasing assets) but it would also increase liabilities (the donation it owes to the charity). No change in net assets. Then, when it pays the charity, cash would drop (lowering assets) but it would also eliminate its liability (decreasing liabilities). Again, there is no change in net assets. Thanks for the detailed info. That makes sense how they keep track of it to make sure it’s all on the up-and-up. I would assume most big companies handle the donation according to the law, but it seems like it would be very easy for the company to make “a mistake” and “accidentally” mark the payment to the charity as a donation rather than as a transfer of funds from the customer to the charity. [QUOTE=GMANCANADA] Also related: there are issues where businesses support charities and they say “proceeds from today’s sale of product X go to charity”. In Canada, “proceeds” means the full sale price, but many businesses, either deliberately or through ignorance, think it means “profit” (kind of like “net proceeds”). The CRA is cracking down on that as well since they believe it misleads consumers. [/quote] I see this type of wording all the time. When I’ve asked the people running the promotion, they seem to think it means profit. “Proceeds” or “net proceeds” from the sale will go to charity. It seems there are many ways to fudge the numbers so that profit from the sale will be little or nothing. I wish there was more regulation around those terms in the US so that customers would have a better idea if their purchase was helping the charity or the business. ---
**Author:** ![CookingWithGas](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cookingwithgas/32/485_2.png) [@CookingWithGas](https://boards.straightdope.com/u/CookingWithGas)\ **Post date:** [January 11, 2017, 4:24pm UTC](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821/7 "2017-01-11T16:24:31Z")
> [@Tired\_and\_Cranky](#): > > I’m not 100% sure, but I think the answer is that, due to the ways that Generally Accepted Accounting Principles work, yes the stores take a deduction but only after they have recognized revenue from the donation. Are you an accountant? I am not but my understanding is that to recognize revenue you must provide a product or service in return. I don’t know how you could possibly book a donation earmarked to give to a third-party charity as revenue. > [@](#): > > 1. This Statement does not apply to transfers of assets in which the reporting entity acts as an > agent, trustee, or intermediary, rather than as a donor or donee. My reading of the standard you cited is that it applies to the non-profit, not to the merchant who is collecting donations and passing them through to the non-profit. ---
**Author:** ![Duckster](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/duckster/32/1244_2.png) [@Duckster](https://boards.straightdope.com/u/Duckster)\ **Post date:** [January 11, 2017, 5:32pm UTC](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821/8 "2017-01-11T17:32:53Z")
I see quite a few products in the grocery store, and advertised on TV when the manufacturer says, “When you buy XX product, we will donate five cents from every purchase to the ‘Save the Gold Fishies Fund’.” The company gets a tax deductible donation, the customers pay for it, and the company has increased sales (and profits) they ordinarily would not get. ---
**Author:** ![iamthewalrus\_3](https://avatars.discourse-cdn.com/v4/letter/i/258eb7/32.png) [@iamthewalrus\_3](https://boards.straightdope.com/u/iamthewalrus_3)\ **Post date:** [January 11, 2017, 6:25pm UTC](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821/9 "2017-01-11T18:25:54Z")
> [@Tired\_and\_Cranky](#): > > 1. Helping the charities makes the stores seem like good corporate citizens to their customers, which perhaps makes customers more likely to shop there. I wonder how that balances against the annoyance of having to say or click “No” to donate every time you buy something. ---
**Author:** ![Omar\_Little](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/omar_little/32/269_2.png) [@Omar\_Little](https://boards.straightdope.com/u/Omar_Little)\ **Post date:** [January 11, 2017, 6:54pm UTC](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821/10 "2017-01-11T18:54:26Z")
> [@Tired\_and\_Cranky](#): > > I’m not 100% sure, but I think… And you are wrong. FASB 116 is applicable to companies in the business of receiving contributions, primarily not-for-profits. A retail store that incidentally collects donations at the check-out, would DEBIT cash (an asset account) upon the receipt, and CREDIT, Payable to Charity (a liability account). The money would never flow through their profit/loss statement, and would never be associated with a charitable deduction made on behalf of the company. When the funds are disbursed to the charity, they would CREDIT cash and then DEBIT Payable to Charity, and it would be off their books. ---
**Author:** ![Tired\_and\_Cranky](https://avatars.discourse-cdn.com/v4/letter/t/a87d85/32.png) [@Tired\_and\_Cranky](https://boards.straightdope.com/u/Tired_and_Cranky)\ **Post date:** [January 11, 2017, 7:02pm UTC](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821/11 "2017-01-11T19:02:16Z")
> [@CookingWithGas](#): > > Are you an accountant? I don’t want to discuss my background here but I’m not an accountant. I might be a dog. I do have some college training in accounting, professional training and experience in financial statement analysis, and volunteer service dealing with non-profits’ accounting and financial statements. I believe that I am correct but I’ll defer to experts with citations if someone wants to correct me. > [@CookingWithGas](#): > > I am not but my understanding is that to recognize revenue you must provide a product or service in return. I don’t know how you could possibly book a donation earmarked to give to a third-party charity as revenue. Charities receive contribution revenue all the time without providing a service. I’m sure that’s no surprise to you. I’m saying that when stores receive the contribution revenue intended for a charity, the stores book the revenue the same way the charity does but they also book an expense that offsets the revenue. The net is that there is no real effect on the store’s financial statements. Charities can take the money without owing anybody anything and so they book the revenue but they don’t have to book any related expense. > [@CookingWithGas](#): > > My reading of the standard you cited is that it applies to the non-profit, not to the merchant who is collecting donations and passing them through to the non-profit. You are right that the guidance I gave says it doesn’t specifically apply in our case. I understand that later Financial Accounting Standards Board interpretations effectively require a store acting as an intermediary between a donor and a recipient charity to do what I’ve said. See FASB 958 (here: [https://law.resource.org/pub/us/code/bean/fasb.html/fasb.958.2011.html](https://law.resource.org/pub/us/code/bean/fasb.html/fasb.958.2011.html)). Although this guidance also generally applies to non-profit entities, Section 908-605-15-4 says that “except for Section 958-605-45, the guidance in the Contributions Received Subsections applies to all entities (NFPs and business entities) that receive contributions unless otherwise indicated.” “Business entities” would include our for-profit store. Section 958-605-25-2 says “Except as provided in paragraphs 958-605-25-16 through 25-18, contributions received shall be recognized as revenues or gains in the period received and as assets, decreases of liabilities, or expenses depending on the form of the benefits received.” No exception for business entities, so this is the general rule. The store must recognize revenue when it receives the donation. The exceptions in subsections 25-16 through 25-18 apply to contributions of services or contributions of certain goods and they don’t apply. FASB 958-605-25-23 provides that “if an intermediary receives cash or other financial assets, it shall recognize its liability to the specified beneficiary concurrent with its recognition of the assets received from the donor.” So the store must recognize its liability to the charity at the same time it recognizes the revenue, as I said above. The net effect is that a store receives $1 in revenue and recognizes a $1 in donation expenses. It increases assets by $1 (cash) and liabilities by $1 (liability to charity). There is no net effect on earnings. If you look at the definition of “intermediary,” new wrinkles come into play. “Intermediary” doesn’t include an agent or trustee of the charity. Different rules would apply to those transactions but, broadly through different means, I believe they are going to get you to the same result for the store. Taking the donations does not financially or taxwise benefit the store. ---
**Author:** ![Tired\_and\_Cranky](https://avatars.discourse-cdn.com/v4/letter/t/a87d85/32.png) [@Tired\_and\_Cranky](https://boards.straightdope.com/u/Tired_and_Cranky)\ **Post date:** [January 11, 2017, 7:14pm UTC](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821/12 "2017-01-11T19:14:59Z")
> [@Omar\_Little](#): > > And you are wrong. > > FASB 116 is applicable to companies in the business of receiving contributions, primarily not-for-profits. > > A retail store that incidentally collects donations at the check-out, would DEBIT cash (an asset account) upon the receipt, and CREDIT, Payable to Charity (a liability account). The money would never flow through their profit/loss statement, and would never be associated with a charitable deduction made on behalf of the company. When the funds are disbursed to the charity, they would CREDIT cash and then DEBIT Payable to Charity, and it would be off their books. FAS 116 says it “applies to all entities (not-for-profit organizations and business enterprises) that receive or make contributions.” Which would include stores that take contributions for other charities. As for the second part of your statement, we completely agree. I said: > [@](#): > > The balance sheet would similarly show no real effect. First, it would get cash from the donation (increasing assets) but it would also increase liabilities (the donation it owes to the charity). No change in net assets. Then, when it pays the charity, cash would drop (lowering assets) but it would also eliminate its liability (decreasing liabilities). Again, there is no change in net assets. Where exactly do you disagree with that? Aside from using the terms “debit” and “credit” that confuse most non-accountants, I’m not sure what you’ve added here. ---
**Author:** ![Corry\_El](https://avatars.discourse-cdn.com/v4/letter/c/ecae2f/32.png) [@Corry\_El](https://boards.straightdope.com/u/Corry_El)\ **Post date:** [January 11, 2017, 9:31pm UTC](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821/13 "2017-01-11T21:31:56Z")
The debate about accounting minutia seems to me beside the point of the question from a layman’s POV which would be whether the store gets some direct monetary benefit from collecting the donations. That would only be true, as it regards taxes, if the store did _not_ recognize the donations as income but then _did_ recognize them as a deduction from income for tax purposes. That makes no sense, and accounting is basically governed by rationality. The rule must be either that the store recognizes the contributions as income but then deducts them as an expense when it donates them, or that it doesn’t recognize them either as income or deduction. Accountants at the store and the auditors have to know which of those is correct, but the answer to the question is that it’s a wash either way. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [January 11, 2017, 10:16pm UTC](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821/14 "2017-01-11T22:16:04Z")
So, to make it perfectly clear, no the business does not get a deduction with your free money. ---
**Author:** ![Mrdeals](https://avatars.discourse-cdn.com/v4/letter/m/ea666f/32.png) [@Mrdeals](https://boards.straightdope.com/u/Mrdeals)\ **Post date:** [January 11, 2017, 11:15pm UTC](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821/15 "2017-01-11T23:15:47Z")
Just speculating, i have no evidence to back this up: The corporation puts the money into a holding account like a money market, and skim the interest off the top. If you get $10M in donations, even skimming 1% off the top is a lot of dough. ---
**Author:** ![watchwolf49](https://avatars.discourse-cdn.com/v4/letter/w/e9c0ed/32.png) [@watchwolf49](https://boards.straightdope.com/u/watchwolf49)\ **Post date:** [January 11, 2017, 11:25pm UTC](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821/16 "2017-01-11T23:25:28Z")
> [@Mrdeals](#): > > Just speculating, i have no evidence to back this up: > > The corporation puts the money into a holding account like a money market, and skim the interest off the top. > > If you get $10M in donations, even skimming 1% off the top is a lot of dough. The holding account will certainly report the interest income to the IRS … the corporation will have to include that as income in their revenue reporting … if they keep it for profit, then it is taxed … ---
**Author:** ![Tired\_and\_Cranky](https://avatars.discourse-cdn.com/v4/letter/t/a87d85/32.png) [@Tired\_and\_Cranky](https://boards.straightdope.com/u/Tired_and_Cranky)\ **Post date:** [January 12, 2017, 4:01am UTC](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821/17 "2017-01-12T04:01:07Z")
> [@Mrdeals](#): > > Just speculating, i have no evidence to back this up: > > The corporation puts the money into a holding account like a money market, and skim the interest off the top. > > If you get $10M in donations, even skimming 1% off the top is a lot of dough. I doubt stores get anywhere near that in donations. Money markets are paying less than 1% per year in interest and the stores will remit the funds to the charity in a month or two. Best case scenario is they get two months of float (maybe 0.15%) on maybe a couple million dollars. But they have to pay credit card interchange fees of more than 1% every time someone charges rather than paying cash. The stores don’t charge administrative fees. [Are Cash Donations at Stores Deductible? - The New York Times](https://bucks.blogs.nytimes.com/2011/04/26/donations-at-the-checkout-counter-are-often-deductible/?_r=0) Stores lose money on these programs. They do it to generate goodwill. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [January 12, 2017, 4:39pm UTC](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821/18 "2017-01-12T16:39:24Z")
> [@watchwolf49](#): > > The holding account will certainly report the interest income to the IRS … the corporation will have to include that as income in their revenue reporting … if they keep it for profit, then it is taxed … Sure, but they’re still making a net gain on the portion of the interest that is not paid as tax. I doubt anyone does this, though - any interest is almost certainly donated along with the direct donation revenue. Otherwise there would be an outcry. ---
**Author:** ![filmore](https://avatars.discourse-cdn.com/v4/letter/f/7993a0/32.png) [@filmore](https://boards.straightdope.com/u/filmore)\ **Post date:** [January 12, 2017, 4:56pm UTC](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821/19 "2017-01-12T16:56:58Z")
From a practical standpoint, how do stores manage the donated money when customers put cash in a special container for the charity? Stores like 7-11 and McDonalds will have special containers for customers to donate their change at the register. How do they make sure all that physical cash ends up going to the charity? ---
**Author:** ![CookingWithGas](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cookingwithgas/32/485_2.png) [@CookingWithGas](https://boards.straightdope.com/u/CookingWithGas)\ **Post date:** [January 12, 2017, 5:48pm UTC](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821/20 "2017-01-12T17:48:39Z")
> [@Tired\_and\_Cranky](#): > > FASB 958-605-25-23 provides that “if an intermediary receives cash or other financial assets, it shall recognize its liability to the specified beneficiary concurrent with its recognition of the assets received from the donor.” So the store must recognize its liability to the charity at the same time it recognizes the revenue, as I said above. The net effect is that a store receives $1 in revenue and recognizes a $1 in donation expenses. It increases assets by $1 (cash) and liabilities by $1 (liability to charity). There is no net effect on earnings. Many companies have been blasted for doing this sort of thing on business transactions–not charitable contributions, but other types. For example, [Travelco.com](http://Travelco.com) acts as an agent when you buy a BigAir plane ticket. It’s a wash for Travelco but they show it on their financial statements as gross as principal, vs. net as an agent. But it’s not a true picture of their revenue at all. It was never really their money to begin with. I would think you have the same issue with treating charitable pass-through as gross revenue, even if you expense it on the back end. [Next page](https://boards.straightdope.com/t/when-stores-donate-charity-money-collected-from-customers-do-they-take-a-tax-deduction/776821.md?page=2)