Paying charities for advertising/affiliate referrals
I have a small online business (singer-member LLC) in Oregon selling pet products. I would like to set up an affiliate program and partner with animal shelters. The idea is to create a coupon code unique to a particularly animal shelter which the shelter can then share with their adopters. When someone uses the coupon code to buy from my website, the shopper would receive a 10% discount, and additionally, 10% of the sale would be given back to the shelter (via a check mailed out quarterly from my business bank account). So, this is a pretty standard affiliate program except that participation is limited to nonprofit organizations. How do I handle the tax side of this, and what headaches can I expect? My understanding is that my payment to the shelter would not be considered a donation, and I should just deduct it as a regular advertising expense. Is it that simple? Does it make any difference if the shelter is a 501(c)(3) or not? And how do I avoid creating any headaches for the shelter organization (accepting payments for services vs accepting donations)? Thank you for your time!
