▲ ▼ Avoid unnecessary taxes for donation
I'm working on a side project that's not yet fully-baked. As such, I don't want to collect real money just yet because I don't want to increase my personal tax burden. In addition, having to pay more taxes is just annoying at an early stage of building a product.
In short, I prefer not to have to add to my tax return when I'm still prototyping my SaaS idea.
Currently, there are a good number of places to accept donations, such as: ko-fi, Patreon, Buy Me A Coffee, liberapay, Github sponsors However, all of these websites pay the project owner money, either through Stripe, Paypal, Payoneer, or a combination of.
My task here is for a platform for me to ask for donations or payments that pay me not in dollar amounts but in virtual gift cards, so that I can:
- Validate my idea
- Use the payments to pay for operational costs: if I can collect payments in the form of virtual gift cards, I can use them to pay for web server costs.
- Avoid having to deal with taxes that come with collecting real money, at least until my product has been fully built out and has real users.
Thanks Abishek for your detailed reply & for validating my problem.
Regarding your points --
1. Yes, I agree. Let's say company Acme Co fills this needgap. I imagined Acme Co to work something like this:
- Acme Co has the ability to accept regular credit card payments just like any other SaaS would (resulting in a frictionless payment experience from the end user/donor).
- That money goes to and is held by Acme Co. Acme Co issues a virtual credit card to a project owner with the donation amount.
- When the project owner wants to pay for server costs, they can now use the issued virtual credit card at AWS, Digital Ocean, or any other established infrastructure provider (they should be able to accept virtual CCs just like a regular card). This also addresses your point #2.
As a result of this flow of funds, real money never actually makes its way to the project owner.
Stripe Issuing lets Acme Co create virtual cards as well as the ability to adjust amounts to the card.
One problem I see while typing this out is that Acme Co can essentially hold funds in hostage if they want to, so trust will be a big factor here.
(I live in the US so this is my understanding of how it would work with virtual CC's in the US.)
I would try to code up my idea into a real web app but my current capacity would only allow a side project, not a full-blown one that would require a business entity and a lawyer...
> The solution is for avoiding unnecessary tax and not tax evasion.
Correct, the idea is for a donor to support a project owner in a payment form that is not cash on the receiving end, ie. by paying for a service provider.
You are right that I was confusing virtual credit cards with gift cards. Disregard the virtual CC part.
> So I think Acme Co. should directly buy credits from various infrastructure services and deliver that to their customer (i.e. project builder)
Yes, I think ultimately it comes down some version of this, and making it super easy for donors to select a provider to gift to the project owner, kind of like a wedding registry.