Charity fundraising
is a big industry. There are charity
fundraising companies that cover almost any aspect of giving money you
can imagine. Two popular but very different methods of fundraising are
product sales and fundraising consulting. Fundraising product sales are
typically used when a smaller
amount of funds is needed while fundraising consultants are used when a
charity needs to raise serious funds. Also, many organizations who use
product sales for fundraising are not legally a charity as defined by
the Internal Revenue
Service.
While the IRS
provides a legal definition to distinguish charity fundraising, many
people consider the purchase of a product that benefits any good cause
to be "charity fundraising" even though it truly is not. Usually groups
who do not have charity status (defined as being designated by the IRS
as a
501 (c)(3) tax-exempt organization which refers to the section of US Tax
Code under which a charity is formed) use product sales as their only
means of raising money. This type of "charity fundraising" can include
bake sales, car washes and a variety of items purchased from companies
that specialize in product fundraising.
What fundraising process is best for you? It depends on your needs
and whether you are a legal charity or not.
Fundraising product companies are usually considered wholesalers who
sell your organization products that you in turn sell at retail. You
will probably have to pay tax
on that sale as well. The fundraising that
results from the sale does not generate a tax deduction for the person
who buys the product from you. That is one draw back if a charity uses
this method to raise funds. Product
sales have a place in the fundraising industry and are often an
easier method of raising funds for smaller needs of schools, clubs,
teams and other similar groups but are not the best form of fundraising
for a charity.
Usually a 501(c)(3) charity will use in-house staff or volunteers for
much of their fundraising but will contact consulting firms when the
charity does not have the expertise required for a complex fundraising
project. Consulting firms do not use product sales for fundraising
and instead develop fundraising plans, strategies and materials to help
a charity raise the funds it needs to advance its mission. Consultants
also train charity staff, volunteers and board members, write fundraising
letters and manage fundraising campaigns. If you found this web
site because you need to raise funds but really want to use product
sales for fundraising and not fundraising counsel, there are a
number of companies listed under resource
links that can help.
As mentioned above, one advantage a charity has is that it can receive
fundraising donations that generate tax deductions for donors. While
generally not the motivation for a donation (here
is an article on that subject), a charity becomes a more
advantageous place for fundraising as up to 1/3 or so of the donation can be
deducted. This is why it makes far more sense for a charity to take
advantage of this ability instead of relying on product sales. Again, the IRS
has determined that even if a charity uses products for fundraising, only the amount paid
over the fair market value of a product is tax-deductible and since most
product sales are at market prices, there is no tax advantage.
I
hope this overview has helped to differentiate between product sale
fundraising and charity fundraising as a means to garner the resources
you need. If you wish
to learn more about charity fundraising, several links can be found
under resources and links that lead to good
sources of information on fundraising, nonprofit organizations and other
information of value to a charity.
* If you arrived here from
About.com, this is my business site and while I believe the information
contained about charity fundraising is helpful, I wanted to disclose
this fact - Rob DeMartinis
