Breaking down Santa, Inc.

A man dressed as Santa Claus walks through a street in Hamburg, northern Germany, on December 24, 2012.

Everyone thinks Santa’s life is just a bowl of cherries, but you try running an international organization that keeps tabs on the naughty or nice behaviors of half a billion kids, not to mention making and delivering their presents, and see how jolly-ho-ho-tastic you feel.

While it’s true Santa has his elves to help him with his monumental task, Jeff Ferro, president of accounting firm Parente Beard -- which, for kicks, just did an audit of Santa’s finances -- says that even elven Christmas magic can have its downsides.

“The interesting thing about elves is they’re immortal, so they never die, so you have to pay them forever,” he says.

Ferro says it’s likely Santa would need about 50,000 elven employees, who, as immortals, could ask for a heck of raise after a couple hundred years on the job.

“You know, the good thing is you don’t have a lot of recruiting costs, you also don’t have a lot of retirement benefits,” Ferro says.

But you would have to keep your employees pretty happy to never give them raises -- and offer a pretty a good base salary. Especially elves, for whom, as Ferro notes, the competition to hire them is probably pretty fierce. 

“I think a lot of people, if you could get a hold of an elf, you’d probably hire them. They’re probably pretty hard workers,” he says.

Which is why Ferro says Santa pays a little more than the going rate for a typical toymaker $40,000 a year -- per elf. The rest of his budget breaks down into fairly typical categories. Reindeer costs: $54,000 a year. Health benefits, assuming that most elves would need a family plan: $770 million. Power for Santa’s workshop in the North Pole: $98 million.

Then there’s the biggie: $39.5 billion to make presents for the world’s children. That puts Santa on par with Starbucks, but of course, Santa’s peers in industry are the Easter Bunny and Tooth Fairy.

So, given the complexity of Santa’s production how should he run his business? As a nonprofit? A for-profit?

Allen Bromberger, a partner with the New York City based law firm Perlman and Perlman which specializing in clients who straddle the profit and nonprofit worlds, says the real question for Santa is where’s his money going to come from.

“It’s not just the financing," Bromberger says. "Santa doesn’t charge for these toys. Where’s his revenue coming from?"

When asked about the possibility of financing via magic, Bromberger points out that any donor in possession of magical abilities probably doesn’t need a tax deduction, and therefore it makes the most sense for Santa to become Santa, Inc. But it seems unlikely that the idea of a for-profit Santa Claus would fly a sleigh with Santa’s target audience. So  going nonprofit is Santa’s best bet.

But that means there's another problem. Bromberger says when you file as a nonprofit, you have to tell the IRS where your funding is going to come from.
 
“The issue there is going to be that if you go tell the IRS that your money is coming from a magic place, I don’t think you’re going to get your application approved,” he says. 
 
The IRS had no comment. And Santa -- well, he’s pretty busy these days.

About the author

Sally Herships is a regular contributor to Marketplace.

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