It happens almost every time you pull out your wallet to pay for groceries, coffee, or a cheeseburger.
A friendly person on the other side of the register asks if you would like to donate extra moons or tuns to charity. If you nod your head in agreement, the cashier adds an extra few dollars to your transaction.
The practice is called point-of-sale fundraising, as charitable donations are channeled through retailers to the final point where customers make their purchases.
All this extra change brings in big money for charities, but it doesn’t give individual Canadians the same tax breaks as donating directly to charity without a cash register in between.
No one gets a tax bill. Really!
In 2021, grocery chains Subway and Calgary Co-op collectively brought in more than $5.5 million for 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 retailers?
The correct answer, according to accounting and charity experts, is neither. When it comes to pay-as-you-go philanthropy, no one gets a tax break in Canada.
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“The individual [customer] would have to donate directly to the charity to receive a receipt,” wrote Toronto-based CPA Brian J. Quinlan in an email to CBC Radio’s The Cost of Living.
“It would be unethical for the grocery store to ask for a charity receipt since they are not donating their own money.”
Higher donations and lower costs
However, some nonprofits say there are big benefits when merchants ask you for change at the checkout.
“It’s the cheapest way for charities to raise money,” said Gena Rothstein, principal of Karma & Cents, a Calgary-based consultancy that advises on philanthropy.
Gena Rothstein of Karma & Cents, a group that advises Canadians and companies on charitable giving, says pay-as-you-go donations are a low-cost way for charities to raise funds. (Submitted by Gena Rothstein)
According to Rothstein, there are big savings for nonprofits.
“They don’t issue tax notes. They do not track donors. They don’t write thank you notes, all the things that cost money to raise money,” she said.
Fundraising costs are high and retailers can help reduce them
A lot of time, planning and effort goes into more traditional fundraising efforts, such as door-to-door canvassing or hosting a glamorous gala.
According to Charity Intelligence Canada, which tracks and analyzes what charities have donated money to, fundraising costs make up about 20 percent of Canadian charities’ annual operating budgets.
When grocery stores or fast food chains collect donations at the cash register for charity, many of these fundraising costs can be eliminated.
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Point-of-sale fundraising is not tracked nationally in Canada, but is monitored by organizations in the United States.
In the roughly 30 years since this type of fundraising began, more than $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 the till have self-proclaimed mandates to be good corporate citizens or community contributors.
However, Rothstein points to another reason stores team up with charities is good marketing.
Retailers can take advantage of a charity’s positive branding to promote their own outlet, which provides good brand quality at a lower cost to the store than more traditional marketing. Also, customers are already at the checkout ready to spend money, so fundraising costs are also lower.
Cashiers across Canada regularly ask their customers to add an extra dollar or two to a charity of the merchant’s choice. (Chris Hondros/Getty Images)
“It’s a win-win for the charity and for the company because they’ve now gotten their brand recognition even further into the community,” Rothstein said, noting that retailers are strategic about which charities they partner with.
“You’re going to give to kids and puppies and health care,” she said.
The more innocuous the better, according to the philanthropy expert.
“Costco gives to Children’s Hospital. Why give to the children’s hospital? Well, apart from the fact that it’s good to do, it’s tailored to the type of customers they have, which are usually families who buy in bulk,” Rothstein said.
Do your research before you give, says a charity expert
On the other hand, charity industry watcher Kate Bachen is not a fan of point-of-sale donations.
“I call it a cash hold. Hands up. Would you like to give $2?’
It may only be $2…but in the end, that $2 adds up to millions of dollars.- Kate Bachen, Charity Intelligence Canada
The managing director of Charity Intelligence Canada is adamant that customers avoid donating to the fund unless they are fully informed about the charity.
Those extra fools and lunatics that people donate to the coffers can really add up, according to Kate Bachen of Charity Intelligence Canada. (Fabiola Carletti/CBC)
Canadians should give to charities that matter to them, according to Bachen, and research how those charities spend their money before donating.
“It could only be $2 here and $2 there. But at the end of the day, that $2 adds up to millions of dollars,” she said.
“It’s perfectly fine when you don’t have information about a charity to say ‘No thanks’ and not feel guilty.
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