When you’re checking out at a supermarket or department store, you’ve probably been asked if you wish to round-up your total to the nearest dollar, for charity. A listener asked our “OH Really?” team about the tax implications for the business in doing that.
For years, businesses and restaurants have collected donations for charity. Brendan Morgan from Akron's Kenmore neighborhood wanted to know if that’s creating a write-off for those businesses, such as a charitable donation or an expense. It's not: if everyone is following the law, the business is simply acting as a conduit for donations.
Steve Russell is with the State of Ohio’s Business Tax Division. He says that when it comes to the business income side of the equation – sales tax – the round-up donations are handled like tips.
“If it’s voluntary, it’s not subject to the sales tax. Whereas if you have 15 people in your party, and the restaurant mandates that you pay a 20 percent gratuity, then that becomes part of the price and that would be subject to the sales tax.”
According to a 2018 survey from Engage For Good, charity check-out campaigns raised more than $486 million for non-profits in the United States.
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