Why No One Gets a Tax Advantage When You Donate at Checkout
It happens almost every time you pull out a wallet to pay for groceries, coffee, or a cheeseburger.
A friendly face on the other side of the checkout asks if you would like to donate an extra dollar or a dollar to charity. If you nod in agreement, the cashier adds a few extra dollars to your transaction.
The practice is called point-of-sale fundraising because charitable donations are channeled through retailers to the end point where customers make their purchases.
All of these additional changes bring in a lot of money for charities, but they don’t give Canadians the same tax benefits as a direct donation to a charity without a cash register in between.
Nobody gets a tax receipt. Really!
In 2021, grocery chains Subway and Calgary Co-op collectively, more than $5.5 million has been donated to food banks, emergency shelters, cancer research and hospitals in Quebec, Ontario and Alberta.
So who can deduct all these donations from their income? Customers or resellers?
The correct answer, according to accountants and charities, is neither. With regard to the philanthropy of the caisses, in Canada, no one benefits from a tax advantage.
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« The individual [customer] would need to donate directly to the charity to get a receipt,” Toronto chartered accountant Brian J. Quinlan wrote in an email to CBC Radio. Cost of life.
« It wouldn’t be ethical for the grocery store to ask for a charity receipt because they don’t donate their own money. »
Higher donations and lower costs
Even so, some nonprofits say there are great benefits when retailers ask you to give change at checkout.
« It’s the cheapest way for charities to raise money, » said Gena Rotstein, director of Karma & Cents, a Calgary-based consultancy that advises on philanthropy.
According to Rotstein, there are significant savings for nonprofits.
« They don’t issue tax receipts. They don’t research donors. They don’t write thank you notes, anything that costs money to fundraise, » she said.
Fundraising costs are high and retailers can help reduce them
A lot of time, planning, and work goes into more traditional fundraising efforts, such as going door-to-door or hosting a lavish gala.
According to Charity Intelligence Canada, which tracks and analyzes which charities have donated money, fundraising costs account for about 20% of Canadian charities’ annual operating budgets.
When grocery stores or fast food chains collect donations at checkout for charity, much of that fundraising cost can be eliminated.
Cost of life5:35Charity at checkout
Point-of-sale fundraising is not tracked nationally in Canada, but is monitored by organizations in the United States.
In the nearly 30 years since this type of fundraising began, more than US$4.9 billion has been raised through cash registers and similar efforts.
There are other incentives for stores
In the absence of tax receipts, many Canadian retailers who ask for donations at checkout have a self-proclaimed mandate to be good corporate citizens or community players.
However, Rotstein points to another reason why stores partner with charities for good marketing.
Retailers can leverage the positive branding of a charity to promote their own point of sale, which provides good branding at a lower cost to the store than more traditional marketing. Plus, customers are already at checkout ready to spend money, so fundraising expenses are also reduced.
« It’s a win-win situation for the charity and for the company as their brand is now even more recognized in the community, » Rotstein said, noting that retailers are being strategic about charities with which they associate.
« You’re going to be giving to kids, puppies, and health care, » she said.
The more innocuous, the better, according to the philanthropy expert.
« Costco donates to Children’s Hospital. Why do they donate to Children’s Hospital? Well, other than it’s a good thing to do, it’s aligned with the type of customer they have, which are usually families who buy in bulk, » Rotstein says.
Do your research before donating, says charity expert
On the other hand, charity industry watcher Kate Bahen isn’t a fan of point-of-sale donations.
« I call it checkout hold. Like, hands up. Do you want to donate $2? »
It may only be $2… but in the end, that $2 adds up to millions of dollars.-Kate Bahen, Charity Intelligence Canada
The managing director of Charity Intelligence Canada insists that customers avoid donating at checkout unless they are fully informed about the charity.
Canadians should give to the charities that matter to them, according to Bahen, and research how those charities spend their money before donating.
« It could be just $2 here and $2 there. But at the end of the day, that $2 adds up to millions of dollars, » she said.
« It’s fine when you don’t have any information about a charity to say ‘No thanks’ and not feel guilty. »