When is a donation not a donation?

August 22, 2008 5:47 AM

How can I accept online contributions to my blog without running through tax-status hoops?

I'd like to have a tip jar on my blog. I set up a Google Checkout and invited to readers to "donate." The response was outstanding, and very gratifying.

Now Google tells me I'm not allowed to accept "donations" without proper 501(c)(3) status. It appears other services, such as Amazon Payments, have the same policy.

1. Is this just a semantic thing? Can I just eliminate the "donate" language to "tip" or "subscribe", or it a problem of accepting money without explicitly providing goods or services in return?

2. PayPal's policies are ambiguous. If I set up there, will I run into the same problems.

posted by luke to Computers & Internet (7 answers total)

I don't know whether Paypal's policies have changed but I set up "donations" on my website in 2005 that were used to help someone's funeral expenses, and we then just transitioned it to site donations. Paypal didn't care about 501c3 hooey, and as far as my taxes go all I do is just list the extra income on my 1040, which is no big thing.
posted by crapmatic at 6:14 AM on August 22, 2008

Just in the spirit of brainstorming ideas - perhaps a loophole you could exploit so that you could use Google or Amazon would be to offer an 'exclusive e-article' to supporters of your blog - a file or special post you send them when you thank them for their contribution.
posted by ferociouskitty at 6:38 AM on August 22, 2008

Best answer: Regarding point one, it is not a semantic issue, but an issue of taking money without providing goods or services:

The Service may not be used to process a Payment Transaction for Seller, or otherwise transfer money between a Buyer and Seller, that does not directly result from a Buyer's purchase of a Product. Notwithstanding the foregoing, if Seller identifies its primary product type as "non-profit" and is verified by GPC as a valid IRS certified nonprofit organization, then Seller may use the Service to process donations from Buyers.
posted by phoenixy at 6:47 AM on August 22, 2008

Best answer: Amazon processes donations without goods sold via its Amazon Honor System service.
posted by mendel at 8:22 AM on August 22, 2008

Dave Taylor takes donations for his tech tips through Paypal and Google Checkout. It appears he is just allowing people to place an order for something.
posted by dgeiser13 at 10:36 AM on August 22, 2008

One reason for this—It would be pretty trivial to set up a money-laundering plan where, say, Dirty Money X is "donated" to party A by party B, and party A then uses that money to "buy" goods or services from party B.

You can, however, offer to sell advertising.
posted by klangklangston at 12:15 PM on August 22, 2008

I can understand Google's reluctance. They don't want to have to get into the middle of any IRS misunderstandings. A "donation" has specific tax meanings, regardless of how other places handle it.
posted by gjc at 6:04 PM on August 22, 2008