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To anyone who is unfamiliar with Humble Bundle, they let you purchase games (or other media) and you pay whatever you want. They also let you divide this money up between Humble Bundle, the content creators (game studio, etc), and a charity in any way you want. So I could pay $11 and choose to give $9 to charity, $1 to Humble Bundle and $1 to the content creators. This is paid in one payment of $11 to Humble Bundle.

I have been wondering how this works from a tax perspective and collecting money on behalf of a charity in addition to receiving money yourself. Would such a business have to pay taxes on the money it collects for the charity, since it is paid in the same transaction (presumably going into the same account) as money going directly to the business itself? Does it count as income?

I considered maybe the business could then just donate that portion of money they received, and then deduct it from their taxes, but I believe I read that there is a limit to how much a business can deduct for charitable contributions, and it seems like they could end up in a situation where they are not able to deduct as much as they donate, and therefore would not be able to pay the taxes on the difference. Because of this, this seems unlikely to be how it would work.

edit:

I had added this as a comment to an answer, but decided to edit the question to add it, because this is what I don't quite understand.

SBA.gov says the following: "remember that the IRS limits the amount of charitable donations that can be considered tax-deductible to 50 percent of your adjusted gross income".

So if 80% of the sale is going to charity, (and for the sake of argument, we assume that it averages that 80% of all sales go to charity), won't they be unable to deduct that much, since the limit is 50%?

edit 2:

As someone pointed out in a comment, my question is assuming that 100% of their income comes from this source. (For the question I am asking, that is the assumption I want taken into account.)

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Generally this is simply a matter of the business paying taxes on the sale (income), balanced by a credit (charitable deduction), which eventually adds up to their not paying taxes on money they collected in order to pass it along to the charity.

Note that because the business is taking the deduction on that donation, you can't take a deduction on the charitable portion of your purchase.

  • It's exactly this. They'd report $11 income, $1 charitable donation, and $1 probably operational expenditures or whatever they classify the payment to the devs as. – Noah Dec 10 '14 at 5:23
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    What I don't understand though is that sba.gov says the following: "remember that the IRS limits the amount of charitable donations that can be considered tax-deductible to 50 percent of your adjusted gross income". So if 80% of the sale is going to charity, (and for the sake of argument, we assume that it averages that 80% of all sales go to charity), won't they be unable to deduct that much, since the limit is 50%? – Kik Dec 10 '14 at 15:18
  • @Kik you're assuming that their entire income is coming from these sales, which it's not. – serakfalcon Dec 10 '14 at 16:08
  • @serakFalcon Well, I suppose the question I am asking is if this is possible if all of your income was to come from these sales. – Kik Dec 10 '14 at 16:12
  • @kik: In that case you'd reduce the percentage that was going to charity, unless you were willing to kick in some nondeductable money. – keshlam Dec 10 '14 at 17:04

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