In most cases, merchants will not need to record the funds collected from the EcoCart product on their P&L (profit and loss sheet). This is because merchants are considered holding agents for the funds during each billing cycle. Instead of recording these donations on a P&L, a merchant may instead track them on a liability balance sheet (example: "Pass-Through Donations" or something similar). This is because there is a timing difference between billing cycles & collections vs. payments. Then, whenever a merchant makes a payment to EcoCart, that amount would be reduced from the liability sheet.
Tracking the funds on a balance sheet would not have an impact on a merchant's taxes or income statement, since it is not considered as revenue.
In the case that a merchant is on a hybrid payor mode or merchant payor mode there may be different tax liabilities. The best practice would be for a merchant to reach out to a tax professional in their area for confirmation regarding donation handling.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
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