Your sales tax exemption is a distinct advantage of being a nonprofit. Sales tax in Massachusetts is 5.0%. Avoiding these fees is a significant cost savings every year.
I recently spoke with an Executive Director lamenting the transaction fees charged by their software provider. When someone makes an online donation, their software provider take 5.5% of the transaction. Ouch.
There goes your sales tax advantage. Now their organization has to pay what amounts to a 5.5% tarriff on donations.
It's difficult to fathom why any responsible nonprofit manager would allow a software company to syphon 5.5% of every online donation when better providers like Paypal can provide the same service for half the fee.
It's kind of absurd really from a strategic perspective. Is there any evidence of a competitive advantage derived from paying a higher fee to lower quality software provider? So why do directors and managers agree to it?
I'm not sure but it's not effective management. Publicly traded companies who have to answer to shareholders have their SG&A costs analyzed, compared, and turned inside out every quarter. Reducing costs by 3% would be considered amazing news and probably results in an increase the stock price. Nonprofits don't have shareholders but should hold their donors in equally high esteem.
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