So McD’s asks you, when you pay, to round up the cost of your order for charity. My question is this: I’m giving the money to McD’s, not the charity. Am I then helping them get a bigger tax deduction for corporate giving? So my 18 cents they match means they get credit for a 36 cent charitable gift?
In: Economics
No. Businesses making donations write off the donations as a business expense, just like cost of goods sold, wages, rent, etc.
Let’s say you buy a Big Mac meal costing $15.20 (incl. 15% sales tax) and you round up to $16.00 and give the difference to charity. Let’s say it costs $9.25 (excl. tax) to make your Big Mac meal.
Therefore:
$ 1.98 is passed on to the government in sales tax
$ 9.25 is the cost of ingredients and overheads.
$ 0.80 is donated to charity.
$ 3.17 is the profit made.
With the donations, the business is assessed for tax on the $3.17 profit. They don’t receive any additional tax credits for the donations made.
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