4 ms·

The tax treatment is a significant benefit no?

projektfu 4y ago
It is unclear, at least, whether the company can claim a tax benefit on additional money paid over the income from the sale. Generally these things are treated as liabilities (like sales tax) instead of income. Even if they did, they would have to count that money as income and then deduct it from the taxable income, which would be a wash, assuming their accounting is above-board. On the other hand, they may have some sleight of hand that allows them to do so. This would be a pretty big deal. Supposedly, register donations account for over $450 million in donations to charity each year. [1] (Again, not sure how that's calculated). There could be upwards of $150 million in unpaid taxes. 1. https://engageforgood.com/ccc-2019/ https://engageforgood.com/ccc-2019/, referenced by [2] 2. https://www.taxpolicycenter.org/taxvox/who-gets-tax-benefit-those-checkout-donations-0 https://www.taxpolicycenter.org/taxvox/who-gets-tax-benefit-...
- luhn 4y ago
  From your own link: > This is where you round up your bill to give to a charity designated by the retailer, and the donation amount appears on your receipt. The store serves only as a collection agent for your gift. Assuming the business is following the law, it will not include your donation as part of its business receipts, or income, nor will it claim the charitable gift as an expense.
  - projektfu 4y ago
    Yes… that is the rule as we understand it. I don’t know what is actually happening behind the scenes. Do you have the details of how this is handled in a specific company? After all, the rules said that Enron can’t hide liabilities in special purpose vehicles just to make their profits look larger. And yet, they got away for a long time not following the rule, despite being audited by a big 5 firm. This CVS thing suggests that companies may be doing something other than putting the money into a liability account and then handing that off as a donation “from their customers”. What else might be possible?
barbazoo 4y ago
What's the tax treatment exactly and in what jurisdiction? I was under the impression that business cannot claim the donations made by their customers for tax purposes.
rhino369 4y ago
Unless there are some loops holes, no. If you book 1 dollar revenue and 1 dollar donation your profits don't change. But I don't even think you can book revenue for a donation made at a kiosk under GAAP accounting.

It is unclear, at least, whether the company can claim a tax benefit on additional money paid over the income from the sale. Generally these things are treated as liabilities (like sales tax) instead of income. Even if they did, they would have to count that money as income and then deduct it from the taxable income, which would be a wash, assuming their accounting is above-board. On the other hand, they may have some sleight of hand that allows them to do so. This would be a pretty big deal. Supposedly, register donations account for over $450 million in donations to charity each year. [1] (Again, not sure how that's calculated). There could be upwards of $150 million in unpaid taxes. 1. https://engageforgood.com/ccc-2019/ https://engageforgood.com/ccc-2019/, referenced by [2] 2. https://www.taxpolicycenter.org/taxvox/who-gets-tax-benefit-those-checkout-donations-0 https://www.taxpolicycenter.org/taxvox/who-gets-tax-benefit-...

luhn 4y ago
From your own link: > This is where you round up your bill to give to a charity designated by the retailer, and the donation amount appears on your receipt. The store serves only as a collection agent for your gift. Assuming the business is following the law, it will not include your donation as part of its business receipts, or income, nor will it claim the charitable gift as an expense.
- projektfu 4y ago
  Yes… that is the rule as we understand it. I don’t know what is actually happening behind the scenes. Do you have the details of how this is handled in a specific company? After all, the rules said that Enron can’t hide liabilities in special purpose vehicles just to make their profits look larger. And yet, they got away for a long time not following the rule, despite being audited by a big 5 firm. This CVS thing suggests that companies may be doing something other than putting the money into a liability account and then handing that off as a donation “from their customers”. What else might be possible?

barbazoo 4y ago

What's the tax treatment exactly and in what jurisdiction? I was under the impression that business cannot claim the donations made by their customers for tax purposes.

rhino369 4y ago

Unless there are some loops holes, no. If you book 1 dollar revenue and 1 dollar donation your profits don't change. But I don't even think you can book revenue for a donation made at a kiosk under GAAP accounting.