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How to Set Up a PayPal Tip Jar for Your Blog

by John Lister
Andrea Chu/Photodisc/Getty Images

PayPal offers an automated "donate" button that can be used for any fundraising purpose, including soliciting "tips" from readers of a blog. If your organization is registered as category 501(c)(3), meaning it is exempt from some federal income taxes, you qualify for reduced PayPal transaction fees and can keep more of the money people donate. You can still use the donate button if you aren't a 501(c)(3) organization, but will not get the reduction on the fees. If you are selling products or services, you can't use the donate button but can use other payment buttons for site visitors to leave a voluntary payment such as a tip.

Technical Setup

PayPal automatically generates HTML code for buttons. You place this code on your site; this code displays the button and links to your account. To get the donate button code, make sure you are logged into your PayPal account, visit the "Create PayPal payment button" page (see Resources) and select the button type "Donations." You can choose whether to have the button be for a fixed amount, or allow donors to choose their own amount. You can also add an ID for the button; so, if you are running multiple donation drives or putting buttons on different sites, you can track how much each raises. During this setup, you can change the wording on the button from "Donate" to anything else you like, such as "Tip."

Verifying Status

To qualify for the reduced fees, your account must be a "Business" account with the business type listed as "Nonprofit" and the category listed as "Charity." This may mean you need to create a new account. To verify your status, log in to your account, select the "Resolution Center" option and provide the requested information, which will include a bank statement or check from your organization and evidence of your tax-exempt status.

Effects of Verification

Once you've supplied the requested information, you'll get an email from PayPal confirming your verified non-profit status. From this point on you will get the reduced fees; this can't be backdated to transactions before you became verified. Being verified also means that you can make withdrawals without any limits. If you use the donate button but are not verified, you can only withdraw a total of $10,000 before you'll be required to submit evidence of what you are doing with the money, proving it genuinely is for a fundraising exercise.

Alternatives

If you operate your blog as a business and sell products or services through it, you can't use the "Donate" button. One alternative is to use the "Buy It Now" button for fixed amount payments. To avoid dispute, make it clear to site visitors that they will not get anything tangible in return for making the payment; for example, use wording such as "Use this button if you'd like to show your appreciation for our services with a voluntary extra payment, just like a tip in a restaurant." Remember that you will have to pay your usual PayPal transaction fees just as if you were making a sale. You remain responsible for any tax liabilities arising from accepting this payment.

Blogging Alternative

If you use a blogging service, check with your provider to see if it offers any "tip jar" facilities as an alternative to PayPal. For example, Google's Blogger lets you create a button for readers to make payments through the Google Wallet system. You can also create links for readers to pay you through virtual currency systems such as Bitcoin which don't involve a financial intermediary, such as PayPal. Such systems can be very complicated, so make sure you understand them before using them and check that they meet your specific needs.

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