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Advice: Paypal Fees

As a result of PayPal's crackdown on 'gifts and services' being used to pay for goods, an artist I follow had decided to start using 'goods and services' but insists on using a fee calculator to add the fee onto the price of their commissions. In other words, making the buyer pay the fee so they don't lose out on their full pay.

I would like some advice on this please because they're insisting that this is acceptable by PayPal but I'm not entirely sure as other sources suggest that this isn't tolerated, as it could be seen as the seller avoiding covering the fees themselves.

Note: I didn't mention the artist's name because this isn't a beware about them, I'm just a friend who's rather concerned about their practises and I don't want to see them get into trouble with PayPal and I'm hoping that there's someone in the community who may be savvy about this kind of thing.

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Jun. 20th, 2015 07:43 pm (UTC)
Let me be 110% clear on this for all the folks out there.

You may not charge your clients the Paypal Fee.

Observe item 8.1.a of the Paypal ToS:
For Purchase Payments, the recipient of the payment will always pay the Fee.

I have spoken to Paypal numerous times on this issue, and they have come back with the same response more than once.

You can't charge your clients for fees.

Paypal fees are a part of running a business. If you don't want to pay it, then don't use Paypal. It is really that simple. Fees are tax deductible, and you should be filing your taxes if you meet the requirements for filing. Speak with someone in your area about taxes, as the rules and such change from state to state, country to country, etc.

Edit: I should also note that depending on the country, Paypal has removed the fees from a lot of their transactions. So essentially artists are taking money for fees they aren't being charged. I'm in the US and any transaction sent to me via someone's bank (not an echeck) or via their balance is free for me.

Edited at 2015-06-20 07:45 pm (UTC)
Jun. 20th, 2015 07:53 pm (UTC)
I went through the ToS yesterday so while I was looking up something related to that Canadian convention in, and I didn't see it in there, but I probably over looked it: Is it still against PayPal ToS to charge someone one price for paying by PayPal, but another price for paying by another payment method? Since that's seen as charging for the PP fee, I would assume so.

Edited at 2015-06-20 07:53 pm (UTC)
Jun. 20th, 2015 07:55 pm (UTC)
I'd imagine that'd still fall under the issue as it's essentially warding people off of paying with Paypal to avoid fees.
Jun. 21st, 2015 04:36 am (UTC)
I believe in that case it really comes down to wording. You can have a "discounted" price if for instance someone pays with cash. But you can't have an *increased* price if a person uses PayPal. At least that's my understanding of it.
Jun. 20th, 2015 08:15 pm (UTC)
Thank you for your response!

That's pretty much what I was trying to tell them, but they're insisting that the fee can be considered as a 'handling fee' and therefore is perfectly legal.

A quote from their own comment back to me about this:

'Taken directly from their TOS
"3.4 No Surcharges. You agree that you will not impose a surcharge or any other fee for accepting PayPal as a payment method. You may charge a handling fee in connection with the sale of goods or services, as long as the handling fee is not higher than the handling fee you charge for non-PayPal transactions."'

I personally don't think it's justified since what they're doing is breaking the first part of that section of the article but I wanted another opinion on this.
Jun. 20th, 2015 08:19 pm (UTC)
as long as the handling fee is not higher than the handling fee you charge for non-PayPal transactions

Unless she's charging a handling fee for all her transactions, then she just quoted why she can't do this.
Jun. 20th, 2015 08:25 pm (UTC)
I believe they only use Paypal for their transactions and they specified this applied to said transactions.

This is why this is quite confuddling for me. If PayPal is the only service they use, does the handling fee stance count?
Jun. 20th, 2015 08:28 pm (UTC)
That'd probably be something that Paypal would have to decide. Because honestly, I don't do business with unethical people who try and shill their fees onto me. She can factor them into her cost of doing business like normal people do, or she can't.
Jun. 20th, 2015 08:32 pm (UTC)
Exactly why I'm not going to commission them anymore to be honest because I'd rather not risk getting myself into trouble nor do I agree with what they're doing.

Thank you for your help with this though!
(no subject) - celestinaketzia - Jun. 20th, 2015 08:37 pm (UTC) - Expand
(no subject) - teatimedoodles - Jun. 20th, 2015 08:45 pm (UTC) - Expand
(no subject) - celestinaketzia - Jun. 25th, 2015 09:53 pm (UTC) - Expand
Jul. 4th, 2015 05:35 pm (UTC)
Here's the issue. The artist themselves told you that the fee is specifically for Paypal. If they had only ever said "I charge a 4% handling fee on all purchases" that would be one thing, but they didn't.

They need to simply incorporate the 4.5% that PP charges into their total price, as this sort of non-sense will absolutely drive customers away.
Jun. 21st, 2015 07:09 am (UTC)
Pretty sure a handling fee only applies to physical goods anyway. With digital, nothing is actually being 'handled' or processed. Consider the term 'shipping and handling'; shipping means the cost of mailing something and its packaging, while handling refers to the effort one takes to pack the item, transport it to the post office, etc.
Jun. 20th, 2015 09:24 pm (UTC)
<< I'm in the US and any transaction sent to me via someone's bank (not an echeck) or via their balance is free for me.>>

That is how Paypal's rules USED to be, when they had "commercial" and "personal" accounts years ago. When they combined everything, EVERYONE gets charged a fee to receive money, unless the sender sends it as a "friends and family" payment. Your e-mail will say "You have received $20 from X", but if you sign in to Paypal and look at the transaction, unless the sender sent the payment via "Friends and Family" from a Paypal or bank balance, it will say you have received $19.12 (2.9% + .30 transaction fee). That's right in Paypal's schedule of fees...

Regarding the OP's question, the artist/seller can ASK (politely) for the payee to include extra to cover Paypal's fees, but they cannot specifically charge extra. If they want to charge more, they have to raise their prices a few dollars to build those fees into what they ask for their art.

Edited at 2015-06-20 09:30 pm (UTC)
Jun. 20th, 2015 09:43 pm (UTC)
Actually I still receive no fees on majority of my transactions. My clients pay balance to balance or bank to balance. I haven't received more than 1% in fees in years.
Jul. 4th, 2015 05:43 pm (UTC)
I wonder if you have a grandfathered personal account or something (from back in the day when it was personal, premiere, and business). The account I have gets ~4.5% charged every time. Granted, haven't taken a payment on it in a while... but it was always massively charged fees.
Jul. 4th, 2015 07:23 pm (UTC)
My business account is about... 12 years old now, so that could possibly be it. x_x


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