By doing it this way, wouldn't sales tax be charged on the "donation" item?

Hi @Edds - Thanks for reaching out to us with your question. I see this is your first post in the Seller Community so I'd like to officially welcome you! 🎉👏

Following Justin's suggestion above, you can use our Tax Rule feature to make the "donation" item tax exempt. Conditional tax rules allow you to preset conditions where taxes won’t be applied. 

During your tax rate setup, make sure to select items that won’t have tax applied when a specific dining option is used. If you have already created your sales tax rate, you can edit your tax rate to add this rule directly from the Sales Taxes section on your Square Dashboard.

I hope this information is helpful but please do let me know if you have any additional questions.