Have you ever stopped to think of Santa as a business owner? In the spirit of the season here are my thoughts:
1) The North Pole workshop is a separate entity from the business of delivering toys and is in its own LLC. This entity receives rent income from the housing of the toy manufacturing workshop. It pays property tax, utilities, insurance and takes depreciation on the building.
2) The toy manufacturing company is most likely an S Corp, so that Mr. & Mrs. Claus can pay themselves a wage and avoid self employment tax on the net income of the company. Every year Santa struggles with a reasonable wage to pay himself and has determined that paying himself 10% in wages and 90% in dividends is too risky. He feels better with a 40/60 split and his accountant prefers a 60/40 split.
3) Now some people are sure that he takes standard mileage on his sleigh. But I firmly believe that the sleigh is 100% business use and therefore he takes the actual expenses. After all a sleigh cannot be used for personal use, I have yet to see one parked outside the local market while he runs in for a few groceries and with the miles he puts on it in one night of deliveries he probably needs a new one every year and we all know that a one of a kind vehicle such as a sleigh cannot be cheap, so taking the actual cost of the sleigh and the fuel it burns in one evening is larger than taking the standard mileage rate even if he does travel hundred’s of thousands of miles.
4) Uniforms and work clothes are provided to Santa and the elves and these are a 100% business deduction because red suits with fur trim are not suitable for ordinary street wear nor are the little green suits with the pointy shoes the elves wear.
5) Santa has health insurance for all his employees and takes advantage of the credit available to small businesses providing health insurance. But best of all he has implemented an HSA plan for all his employees. The HSA saves him money in health insurance premiums and he has generously passed the savings on to his employees by helping them to fund their HSA. And this year he has made a note in his file to let his payroll company know ahead of time how much his health insurance premium is so they can add it to his W2 without having to issue a corrected one.
6) Santa is a generous employer and not only has health insurance for each of his elf employees he also has a 401(k) plan for them. He makes sure to maximize his deferral every year with his eye on retiring to a beach one day.
7) One of the nice things about his toy manufacturing business and the time of year that he delivers the toys is he never has to take an inventory count at year end. The toys are all delivered and the shelves are empty letting him take 100% of the cost of making the toys as an expense.
8) During the month of December when it gets really crazy in the toy factory, Santa provides meals on the premises for the convenience of all his elves. These meals are 100% deductible because they are on his premises and for the convenience of more than 50% of the elves.
9) Now a third business I am sure he has is a farm. The business of raising and caring for the reindeer is separate from a toy manufacturing business and a commercial rental and is therefore it’s own entity. The farm rents the reindeer to Santa for income to cover the costs of maintaining a herd of reindeer.
And there you have it my thoughts on Santa as a business owner. Merry Christmas to you all!