Fact check: Stores cannot use checkout charity funds to offset their own taxes

·4 min read

The claim: Corporations use customers' donations at checkout to reduce their own tax expenses

Anyone who’s ever been to a grocery store has probably been asked whether they want to donate a few dollars to charity at checkout.

Some social media users are spreading misinformation about what happens to that spare change after customers leave the store.

“When you donate at the register, that company is using YOUR donation to fund THEIR tax deduction,” claims a meme shared to Facebook on May 4.

But experts say this is false.

USA TODAY reached out to several accounts that posted the meme for comment.

Companies can claim their own donations but not their customers'

There are two ways corporations can raise money for charity through checkout campaigns: by donating a percentage of their income or by encouraging customers to donate themselves.

The Urban-Brookings Tax Policy Center, a Washington, D.C.-based think tank, addressed this claim after it went viral on TikTok in 2020.

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TPC reported that when a company donates a percentage of their own profits, they are eligible to deduct up to 10% of their pretax income per year. This charitable giving arrangement, which is often called a “charitable sales promotion” or “commercial co-venture,” requires the corporation to register in a co-venture with the government.

Donations made by customers at checkout are not tax-deductible for the business, as the donation does not come from the company. According to TPC, the business only serves as a collector for charitable donations from its customers and has no right to claim any of the collected funds.

The meme does not specify whether it is claiming companies use those funds to pay their own taxes or claims them as their own deductions. Both are wrong.

Experts agree stores cannot deduct customer donations

USA TODAY contacted several experts from different tax think tanks who confirmed that companies cannot use funds donated by customers for tax deductions.

"The business would not include that (customer) donation in its business receipts or income and would not deduct the donation either (at least if it’s following tax law). So bottom line, the meme is factually false," Garrett Watson, a senior policy analyst at the Tax Foundation wrote in an email.

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Renu Zaretsky, a writer for TPC, agreed companies cannot deduct their customers' donations under the Generally Accepted Accounting Principals, monitored by the Financial Accounting Standards Board.

"A company (or an individual) can only claim a tax deduction from income," she told USA TODAY. "A company cannot recognize a charitable donation made at a cash register by a customer as income, because no transaction (exchange of a good or service for money) occurred."

Customers can deduct their donations from their own taxes

The tax benefit in this scenario goes to the customer making the donation.

The customer can use their receipt to make an itemized deduction on their federal income tax. However, only about 9% of households claim itemized deductions, and those that do tend to come from higher-income households, according to TPC.

Individual tax payers can only deduct mortgage interest they pay directly to a lender.
Individual tax payers can only deduct mortgage interest they pay directly to a lender.

TPC said misinformation around checkout charities could be financially detrimental for the charities involved. In the last three decades, checkout campaigns have raised more than $5.3 billion for charities.

“Misinforming a younger, more impressionable audience is bad for charitable giving and for their understanding of tax policy,” TPC wrote.

Our rating: False

We rate the claim that corporations use funds customers donate to charities at checkout to offset their own tax expenses FALSE, because it is not supported by our research. According to tax policy experts, companies cannot deduct funds they collect through charity checkout campaigns. Customers are eligible to use their own checkout donations as itemized charitable deductions.

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This article originally appeared on USA TODAY: Fact check: False claim that checkout charities offset corporate taxes

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