"Donate" has a very specific meaning, at least in the US, and comes with numerous accounting connotations, including the ability to write off the expense. As many people don't realize that "charitable donations" do /not/ include "donations" to purchase toys for children, it is misleading to use the term "donation" in this circumstance.

Meanwhile, often the person /accepting/ the donations doesn't understand this either. You cannot, for example, accept a $5 "donation" and then send someone a $5 product back to them: that is a "sale", not a "donation". You do not "donate" to Ikea in exchange for a chair: you "pay" them $5 for it.

In this case, this person obviously doesn't get it. "Why? These are my customers!" <- Right, which is why they are not "donating". These "customers" are buying toys, which are then being sent to other people on their behalf. These are /purchases/, like any other. This seller even goes so far as to state they are operating "just like any other retailer would".

At which point we ask the killer question: are they collecting sales tax? This is where the theoretical issues suddenly run right into the brick wall of reality, as sites that believe they are accepting "donations" on behalf of charitable work, such as handing out toys to children, put everyone in a position where they fail to realize that they are operating an online retail store where the receipts need to be reported (to the IRS), sales tax needs to be collected (for sales made to people in the same state), and the people buying the gifts can /not/ write off the expense.

PayPal is therefore very right to be wary of these situations, and often contacts people making the claim "only a nonprofit can use the Donate button", as the PayPal representative stated in this e-mail. I know this, as they contacted me once: I had a button "Donate to saurik.com" on the top of my website, which I ended up changing to "Contribute money to saurik.com".

That said, I am actually not 100% certain that that is their official "for everyone" rule. This author was correct when they said that "worthy causes" is mentioned in the PayPal PDF [1] on this feature: a more full quote being "for your nonprofit or worthy cause"; that said, the PDF also claims that when you sign up for your PayPal account you should do so "selecting “nonprofit” as the type".

(edit: Reading some more context of the story from Regretsy, including more responses from PayPal, I think that what PayPal means by "worthy cause" may actually be those "on behalf of verified non-profit organizations", not that that is made clear at all in that PDF.)

Their website [2], meanwhile, only ever seems to talk about nonprofits, but goes into detail regarding confirming non-profit status only for obtaining a discount on processing fees. I can certainly see that this is confusing, and I also believe I see a lot of websites around that /do/ use "Donate" in weird ways; certainly, if they really cared to limit it to nonprofits, they could actually enforce your account type /was/ nonprofit before letting you use it.

So, I personally believe that they simply contact vendors who seem to be running a for-profit sales business (even one that is losing money or breaking even "for the children") using "donate", rather than people who are simply using "donate" "without being a non-profit". How do they figure that out, you ask? My guess is that users are flagging the transactions as fraudulent, or complaining to PayPal using the dispute transaction feature (which some PayPal users treat pretty flippantly), using wording that indicates that they were buying something.

(For the record: I'm pretty certain that's what happened to me. I /also/ run a retail product called Cydia, which accepts payments through a separate PayPal account for SaurikIT (my company). People can contribute money to the cause I represent (open access to devices), or purchase things from Cydia. However, some users would just send my personal account (which I use for contributions to my work) $1.00, either by sendmoney or /my "Donate" button/, and then go on to say that they paid me $1 for some product in Cydia and that I didn't send it to them.)

In the end? While I think PayPal needs to be clearer on some things, I do not actually blame them for their reaction here. This setup seems "sketchy", was probably not handling the taxes on the sales correctly, was almost certainly handling the "extra money sent to the family" part incorrectly, and in the end went over the top with this emotional appeal (seriously? I have to have crying children surrounding this text?) rather than looking at this as an intellectual debate about PayPal's policies here (which might be interesting, and might cause everyone, including them, to learn something).

[1] https://www.paypalobjects.com/en_US/pdf/PP_Online_Donations....

[2] https://merchant.paypal.com/us/cgi-bin/?cmd=_render-content&...