FACT CHECK: Can Companies Use Customer Charity Donations For Tax Deductions?
A post shared on Twitter more than 38,000 times claims companies can use customer charity donations for tax write-offs.
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Companies are unable to use customer donations for tax deductions, according to experts. Customers can use their own charity donations for itemized deductions.
Social media users have been sharing a meme that claims companies use customer charity donations for tax deductions. “Would you like to help us con you into helping fund our end-of-year tax write-off so that our company can get good press by looking charitable without dipping into our own profits, much of which is wages stolen from our own workers?” reads part of the text included in the post.
The claim that companies can use customer donations for tax deductions, however, is inaccurate. Customers can use their charity donations for tax write-offs, but companies cannot, as these donations are not part of their income, according to an article from Tax Policy Center. With optional checkout donations, companies are simply acting as collectors of the donation, which is not entered into the company’s income or business receipts, explains the Tax Policy Center article.
Garrett Watson, a senior policy analyst at the Tax Foundation, explained further in an email to Check Your Fact. (RELATED: Did The World Economic Forum Report On The Omicron Variant In July?)
“There are generally two methods for charities to benefit from a checkout sale. One is the firm dedicates some portion of its sales to the charity (say, 1% of the pre-tax sales subtotal). In this case, say, 1% of a $100 pre-tax sale would be deductible for the business but not for the customer,” Watson said. “The second method is what’s being referred to in this meme: the customer may elect to donate, say $1, when paying the amount owed at the register. This is separate from the sale itself, and would be deductible for the customer who donated if it goes to a qualifying organization (such as a 501(c)3). The business would not include that donation in its business receipts or income, and would not deduct the donation either.”
Watson added, “So bottom line, the meme is factually false that customer donations are a ‘end-of-year tax write-off,’ because the business cannot use the donation to reduce their tax bill. Only the customer can.”