BBB of Greater Houston & South Texas

Charity Thrift Stores

According to the National Association of Resale and Thrift Shops, the resale industry has been reinvigorated for a number of reasons: the increased interest in philanthropy, the popularity of environmentally-conscious shopping, the chic of vintage clothing, and the love of a bargain.

Of the estimated 15,000 resale shops in the United States, about a third involve charitable activities. As resale shops have significant differences in how they are run and who they help, we offer the following advice to consider before donating or purchasing secondhand items.

1. Who’s Minding the Store?

A resale shop can be either a charity thrift store or a for-profit enterprise (the term thrift store usually refers to shops involving charities). In general, there are four resale possibilities:

Conduit shops are run by volunteer church and civic groups. After expenses, these thrift stores distribute the remaining funds raised to various local charitable organizations.
Training and/or Rehabilitation Shops involve service organizations such as The Salvation Army and Goodwill Industries which operate thrift stores as part of their program activities with the goal of rehabilitation through employment.
Charity Sponsored operations solicit donated goods to help raise funds for a single, designated charity and are not part of any training or rehabilitation activity.

These in-kind donations are used to raise money either through sales in the charity’s own thrift shop(s) or by selling the goods to an independently operated store. A number of veterans organizations are involved in such specific charity appeals.

For-Profit Resale Stores, in most instances, have no connection to charity either in terms of the collection of goods or in who benefits from their sales.

2. How Much Goes to the Charity?

Since shop types and solicitation circumstances vary, it is important to ask the organization how a charity will benefit from a donation of goods. For example, if the goods will be sold by the charity to a third party, such as an independently managed store, the charity might receive a percentage ranging from 5 to 20 percent of store sales, or a flat fee, such as a couple of dollars per bag of collected goods, despite what is inside.

3. Do You Know the Fair Market Value Rule?

The fair market value of donated goods can be deducted on your federal income tax as a charitable gift. That’s the “going rate,” or sales price, for comparable items in the thrift store (which usually is significantly less than the value of purchasing a new item). While it is important to ask for a properly authorized receipt for donations, most charities will not estimate the value of the gift. That responsibility is usually left to the donor.

Also, remember that if you are providing goods directly to a for-profit resale store or if your merchandise is sold on a consignment basis in witch you get a percentage of the sale, the donation is not deductible.

If the total claimed value of goods donated to charity exceeds $500, complete and attach IRS Form 8283 to your next tax return. A qualified written appraisal also will be needed if the claimed value is over $5,000. For more deductibility information, consult an accountant and/or see IRS Publications 526 and 561.

4. Collection Bin Cautions

Don’t assume that all collection bins in shopping center parking lots are either connected to charity thrift shops or will somehow help the needy. They could be connected to for-profit salvage operations that turn clothes into rag-bond paper or sell them in developing countries. Look for a clearly marked bin that includes a phone number and take the time to check out the benefiting charity with the BBB before making a donation.