Legality of PayPal donations?

May 7, 2006 4:54 PM

What is the legal status of having a PayPal Donate button on your website?

Can websites just put up a site and have a PayPal Donate button on them and that's it? Do they have to register as a charity? Do they have to state what they are using the donation for? Can all money be used to feed someone's cat or must it be used to improve the website? Can donors require a refund of their money legally for any reason? I guess this all relates to the legal status of gifts? I am mostly interested in the legal status of donations other than tax implications but that could be useful to.

The laws of any country would be interesting. Thanks for your thoughts.

posted by zaebiz to Law & Government (5 answers total)

To quote from The Princess Bride.

"You keep using that word, I do not think it means what you think it means."

In this case I think you've mistaken 'donate' as implicitly meaning 'donate to charity' and perhaps have assumed 'get a tax receipt' is in there as well. As pointed out above, this is not the case.

Metafilter takes paypal donations. If Matt wants to buy beer with them, that's fine with me.

Donors can only ask for their money back if they have an expectation of what will be done with the money. So it's one thing if the button says "donate to help poor starving children in country X", where one might assume some money is lost to administration, but otherwise goes to food in country X. It's a different ball game if the buttons says "if you like my site, donate here". If the button just says donate, then you have no right to assume they're doing anything in particular with your money at all, and by giving it to them you are agreeing that that's ok with you.

Donating to a website should be considered the same as giving money to someone on the street. Theycan do whatever the heck they want with it.
posted by tiamat at 5:55 PM on May 7, 2006

A 'donation' to a website is the same as a 'donation' to a homeless person on the street. The website and the homeless person both must pay income tax as they would if they had earned the money by some other means.
posted by delmoi at 6:19 PM on May 7, 2006

Response by poster: Ok let's say hypothetically you set up a website all about the New Orleans floods, the recovery efforts and the volunteers. Then you just had a PayPal Donate button on the site with no details about what the donations are for. Wouldn't there be some reasonable expectation by donors that their donations would be going to the victims of the floods or to the recovery effort and not to your next crate of beer?
posted by zaebiz at 6:38 PM on May 7, 2006

hen you just had a PayPal Donate button on the site with no details about what the donations are for. Wouldn't there be some reasonable expectation by donors that their donations would be going to the victims of the floods or to the recovery effort and not to your next crate of beer?

That would be fraud if you misrepresented the purpose of the donation like that. Although you could probably legally get away with it if you took some percentage of it for administrative purposes and only passed along x percent, where x is a small amount.

But that is a very different situation that the one posed in your initial question. There is nothing magical about paypal or the word "donate" that has anything whatsoever to do with charity or "doing good" or any of that. If a website asks for a donation (and gives no further elaboration) then essentially it's just like the guy in the subway that's playing the sax with a hat on the ground in front of him. He might use that change to pay his rent, or he might use it to buy booze. You don't know, and it's not your right to know. After you drop your change in the hat it's no longer your business.
posted by Rhomboid at 7:02 PM on May 7, 2006

In fact, here's an example of a site with a donation button that is explicitly not a charity: stevepavlina.com. He earns more than $100,000/year off this website and other streams of revenue. He's not a charity. But he's upfront about it and people do donate to him.
posted by zanni at 1:59 AM on May 8, 2006