Author Topic: Donations to KatsBits (and other websites)  (Read 7707 times)

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Offline kat

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Donations to KatsBits (and other websites)
« on: November 12, 2014, 10:49:46 PM »

(image courtesy PayPal)



Over the years visitors to KatsBits and other websites have wanted to show their support by 'donating' or 'gifting' funds directly to a site rather than making Store purchases. Previously this wasn't an issue, site visitors could gift/donate to their hearts content. In recent years however, changes to Tax law & regulations, the US and UK in particular, have complicated the matter so that now most eMoney or ePayment gateways, PayPal included (see here US and here UK), can only accept 'donations' or 'gifts' on behalf of registered, authorised or properly recognised Charities or other non-profit entities and organisations.

In essence, to accept donations individuals and entities now have to be appropriately registered and recognised specifically as not-for-profit concerns by the eMoney provider through which payments are to be accepted - note this doesn't necessarily mean individuals or entities having to be Officially Registered Charities with a Charity Number (UK) or 501(c)3 Exemption status (US), it may simply require persons involved making legal/contractual declarations they are not collecting funds for profit.

Furthermore, whilst it may not be specifically against the law to accept donations without being duly acknowledged, doing so is a terms of service violation, one that often result in permanent account suspension or banning (blacklisting) - this is in fact one of the main reasons PayPal will shut down accounts without warning, something it is well within its 'rights' to do*.

So just how are KatsBits and other websites supposed to accept 'donations' or 'gifts' these days?

Well aside from their not being referred to as 'donations', 'gifts' etc. because of the above (the Tax man doesn't understand or care about semantics and word play, a 'donation' is a 'donation', a 'gift' is a 'gift', all of which have particular tax liabilities and burdens), visitors can show their support using PayPal's "Send Money Online" feature; all that's needed is a valid email address, "sales@katsbits.com" for example, or mobile number and an amount - if the recipient already has an account the transfer is immediate, if they don't an email notification will be sent requesting they create an account to access the waiting funds.

As a final note it's worth dropping site owners a note about this if they appear to be accepting 'donations/gifts' not attached to any immediately obvious charitable/non-profit activity if anything just to make them aware of the issue should they not be (and their running the risk of account closure and fund confiscation/return).


FootNotes:
* one of the primary reasons for the distinction between "donations" and standard "money transfers" is that the former, donations, don't incur transaction fees whereas normal money transfers do. For the recipient (account to which money is sent), fees are reduced for the former but not the latter. This means that eMoney and ePayment Gateway providers take a dim view of accounts using a faux charitable or non-profit status in an attempt to falsely reduce or avoid transaction fees. Essentially another terms of service violation that will get an account suspended or permanently banned.

Offline ratty redemption

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Re: Donations to KatsBits (and other websites)
« Reply #1 on: November 14, 2014, 08:54:13 PM »
interesting, and can i ask how much the transaction fees are with paypal?

Offline kat

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Re: Donations to KatsBits (and other websites)
« Reply #2 on: November 14, 2014, 11:21:47 PM »
It's supposed to be 3.5% (+20p) but seems to vary depending on what Country's the sender and recipient are in, the currency used, and whether the person receiving has their account set up to accept the currency being sent (otherwise there's a currency conversion fee). Someone based in Canada for example, sending to someone in Argentina might be paying a different fee than someone sending from Germany to the UK ($CA to $AR versus Euro to GBP).  You can find out more here though - https://www.paypal.com/uk/webapps/mpp/paypal-fees

Offline ratty redemption

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Re: Donations to KatsBits (and other websites)
« Reply #3 on: November 14, 2014, 11:37:00 PM »
understood, thanks kat.

Offline kat

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Re: Donations to KatsBits (and other websites)
« Reply #4 on: January 26, 2016, 10:46:30 AM »
First post has been updated to include the following;


Please note: PayPal considers this form of transaction a payment for products and services and not a gift or donation so it may not be possible to offset monies sent for tax purposes.

 

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