Is Amazon Smile A Force Of Good Or A Force Of Greed?

On Cyber Monday, social media was critical of Amazon Smile, a program meant to support charities of choice, because Amazon could claim those donations as a tax write-off. Others, however, were openly supportive of the program as a way to draw in more contributions.

By joining the Amazon Smile program, customers would see 0.5% of the value of eligible purchases go to a charitable organization of choice at no extra cost. That in theory, however, allows Amazon to take the contribution as a tax write-off.

One commentator on social media wondered if there was also a new feature on Amazon that would make the company pay its federal taxes. Another noted that Amazon could possibly claim the contributions as a tax write-off, adding to its overwhelming wealth. Direct contributions to a cause of choice would likely be the better route, another person added.

Amazon Smile operates as a 501(c)(3) organization, designated by the Internal Revenue Service as a non-profit charitable entity. The IRS notes these organizations cannot operate for the benefit of a private interest.

“If the organization engages in an excess benefit transaction with a person having substantial influence over the organization, an excise tax may be imposed on the person and any organization managers agreeing to the transaction,” the rules state.

Amazon paid $162 million in federal taxes on its 2019 return. That was the first time it paid federal income taxes since 2016. That amount was roughly 1.2% of its pre-tax income for the year, compared to the federal corporate tax rate of 21%. A February report from CNBC found Amazon “likely” used tax credits and other deductions to lower its tax burden.

In outlining its tax obligations for 2019, the company said it followed “all applicable federal and state tax laws, and our U.S. taxes are a reflection of our continued investments, compensation of our employees, and the current tax rules.”

The 0.5% contribution, meanwhile, is not much. A $40 purchase on Amazon would net a 20 cent donation. Amazon in the third quarter reported net sales of $96.1 billion, which would generate some $480 million in charitable contributions if every purchase used the Amazon Smile program. That compares to net income for the company of $6.3 billion.

Some of the comments online also noted it’s a public relations stunt, adding Amazon only increased its minimum wage to $15 an hour after a public outcry. Seeing online orders rise during the pandemic, the company said it was offering a $3,000 signing bonus to some new hires in the United States.

But the comments weren’t all bad. On Cyber Monday and during much of the Thanksgiving shopping season, many charitable groups were openly expressing support for the program.