Laws against donations? + Some other questions

I wasn't sure where to ask this question, but I guessed this was a good place because I'm assuming many server owners have dealt with donations.

My first question is if there are any legal issues when it comes to asking for donations. On our website we have a page where users can donate. In the future if we end up getting a good amount of money each month, we will most likely split the extra money among us server owners (5 of us). We ARE giving donators special ranks with perks in return for their donations. Do we need any kind of license or anything to do this? If so, how easy is it to get?

My second question is for anybody who gives out ranks and perks for donators. On webs.com (the free website we use to make our web page), they have a widget specifically for donations. It is really cool because it has a thermometer to show how close we are to goals, it gives users a lot of donating options, and it even shows the top contributors. However, there is one problem. When a user donates, they have no way of posting their Minecraft username to let us know who donated. (At the moment, we send out a confirmation email to donators and ask them to respond with their username). This is a slight hassle and I was wondering if there was an easier way to set up donations for a minecraft server (some kind of html script possibly?).

And finally, I was wondering if there was an easy way to make the donating ranks automatic. I saw on obsidiancraft.com, they have some sort of system that allows users to vote on the website, then when they do, they type /redeem in game and they receive diamonds. I am wondering how I can do this and if there is a way to connect it with donations as well.

Thanks.

 

Still need some help.

 

I also want to know about the first question about a license. But for the second question, look into Buycraft. That looks awesome, and great! People can do /buy <package> and it will give them a unique link where it knows their username and what package. They go through PayPal, on Buycraft's site, and after they paid, it sends a command to the console, like a promote command. If you want it to expire, you can set in the Buycraft settings how long a package lasts, and what plugin to enter when that expiry period is over, like maybe demoting them.

 

I still have found nothing about the laws. I'm sure somebody has to know. Any help?

 

In the uk, you are allowed to generate £7000 until you have to start payiing 20% tax on all income.

 

Yeah, once you reach large amounts of money, you either have to pay tax or procure a certificate stating you are a NFP organisation (which I doubt you are).
Up to a couple of thousand dollars I think, do a bit of research, I think PayPal has some info on it

 

I also wonder about the donation aspect.

 

I'm not 100% sure about this, but I believe you have to call them donations. If you say that they are purchasing something, then I think it is considered selling services and that is where you could get into issues.

 

The important word here is income. if you are generating an income from this which goes beyond server costs then you are obliged by law to declare that income regardless if its a donation or a purchase. However, if your funds are to cover future or previous server costs then technically you haven't recieved an income.

I also understand paypal have to notify the tax office if a certain amount of money is paid into your paypal account (£500 in the uk i think, but not 100% sure).

 

Good question, Id like to be educated on U.S laws if anyone knows

 

Yes I live in US. Do those laws apply to the US?

 

You can accept donations if you are based in US from people over the world but you only have the right to win a certain amount of cash before needing to declarate it as profits and paid for yourself.

And i don't know if you have to pay the tax but it's not suposed.

 

I use to use Webs.com
Try out enjin.com
ALOT better with SOOO many more features and just... better. Rather cheap as well if you want to actually buy a plan.

 

I have been googling the problem as well, if you do receive money over the server costs and that exceeds a legal amount like 1000$, then wouldn't you have to register as a single-man business and pay income taxes? Even if you are accepting payment and it only exceeds the lets say 400$ server costs by 50$ or so, you would still have to register as a company, state your server costs and you can then remove those from the amount of money you receive i.e. Tax you would pay. I'm not sure if I'm making sense here, just trying to figure out the problem as well.

Another problem is that you aren't legally allowed to have business transactions under the Age of 18 in Germany, I don't know about the UK/US, but if you are under age isn't accepting any form of payment illegal?

 

Indeed it is. They will freeze your account if your under age. Have your parents register an account in their name.
Secondly, i highly doubt that youll be making enough anytime soon to have to worry about. However yes there is a limit before you must pay taxes, but its your job as a citizen to do so! Mature lads, and fullfill your rights as a citizen.

 

OK, any idea on where to find that sort of information? And how do I register my PayPal account as so that I would want/need to pay Taxes?

 

With paypal, once you recieve 200 payments, or $20,000, they will ask for your Social Security Number or your Taxi ID. I thought it wouldn't work for me, because i'm 16, but infact, my social security number worked just fine.

 

I'm half way there

 

I think the best advice is you need to speak with a CPA. Federal and State tax laws are annoyingly complex. Also if you’re underage, you really need to involve your parents, because they are claiming you as a dependent, which means they have to claim your income as theirs. Just because you individually may be under the limits, when you factor in their income, taxes maybe owed. There is also the whole hobby vs. business that may also come into play.
Seek professional advice.

I can tell you from firsthand experience; the government wants their money, even if it is only 20.00 owed on collected sales tax.

 

OK thanks a lot. My father knows all about my Server, and I fear I may be coming close aswell. I'll ask him about it in the next few days and ask him to call his lawyer about it. Thanks a lot for the info.

 

In $ or amount of payments? I found out the hard way

 

Amount of payments.

 

Yes, I was confronted today by a donor who wanted a refund on his $100. He had his parents content since he was only 12, this he told me via Skype message. Does he still have any legal grounds? I have since then started on a terms & conditions, will that help me in any way?

 

If the terms and conditions weren't in place when he donated, he has ground to get his money back. Think ahead

 

Terms of Services are contracts and in most states a minor can dis-affirm a contract at their discretion. Only recourse you have if they dis-affirm the agreement to the ToS, you don't provide them service anymore.

When dealing with a minor you should always require the parent to affirm the agreement. This way the contract is binding on the parent and not the minor.

Disclaimer: I am not a lawyer and this is not legal advise. You should speak with a lawyer for legal advise.

 

As someone that has seen a kid get put through the wringer at paypal - I can tell you that paypal will freeze your account if they find out you are underage.
They will freeze your account if they think you are doing something unethical.
When your paypal account is frozen, you can't do ANYTHING - not even contest chargebacks.

When your account is frozen, you CANNOT remove your credit card or bank account from the paypal account.

If you have a paypal account with money in it and your transfer or spend the money and then chargebacks come in - your are liable for paying back the money. Be very aware of this fact.

The other thing with paypal is that paypal has almost no standing with respect to credit card companies. So, if someone puts a chargeback from their credit card backed paypal account against you, they are going to get their money back UNLESS you have real legal records showing that the person willingly made the transaction AND you contest the chargeback within 10 days.

Finally, if you are using paypal for donations, you need to check your account regularly.

 

This is partially right, with PayPal if you receive 200 transactions AND $20,000 then by law Paypal will ask you for your tax id or social security number, or both.
Here is some more information on paypal: Link