Advice: Paypal Fees

[teatimedoodles.livejournal.com]

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.

Comments

[celestinaketzia.livejournal.com]

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. (https://www.paypal.com/us/webapps/mpp/ua/useragreement-full#8)

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.

[everainsley]

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.

[celestinaketzia.livejournal.com]

I'd imagine that'd still fall under the issue as it's essentially warding people off of paying with Paypal to avoid fees.

[jakejynx.livejournal.com]

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.

[teatimedoodles.livejournal.com]

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.

[celestinaketzia.livejournal.com]

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.

[teatimedoodles.livejournal.com]

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?

[celestinaketzia.livejournal.com]

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.

[teatimedoodles.livejournal.com]

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!

[celestinaketzia.livejournal.com]

Well, I went ahead and sent a poke to Paypal about it. Let's see if they get back to me.

[teatimedoodles.livejournal.com]

Thank you very much! I hope they can provide some answers. It's such a grey area especially since it's digital goods.

[celestinaketzia.livejournal.com]

Spoke to Paypal about it. The "handling fees" are only legal if she charges them across the board, so... if she's not taking any other payments and would normally not charge handling fees if she accepted cash, then she can't do that.

[ljmydayaway.livejournal.com]

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.

[shukivengeance.livejournal.com]

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.

[fiawol.livejournal.com]

<< 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...
https://www.paypal.com/us/webapps/helpcenter/helphub/article/?solutionId=FAQ690

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.

[celestinaketzia.livejournal.com]

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.

[ljmydayaway.livejournal.com]

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.

[celestinaketzia.livejournal.com]

My business account is about... 12 years old now, so that could possibly be it. x_x

[tylociraptor.livejournal.com]

They can figure for the fee in their commission prices (for instance, listing 22 instead of 20 on their commission price sheets), and this is what they SHOULD do if it is big enough a deal for them. They cannot specifically include the fee in their price, however.

[teatimedoodles.livejournal.com]

Thank you for your response! I suggested this to them myself but they're insisting on this method, hence the advice request since I really don't know what I can say to convince them otherwise.

[tylociraptor.livejournal.com]

NP! A little addition to that- they would have to adjust for ALL commissions... not JUST ones paid via paypal.

[teatimedoodles.livejournal.com]

I believe they only accept PayPal but thank you~!

[latiro.livejournal.com]

Seconding what Celestina pointed out. The seller is not allowed to have buyers pay fees so they (the seller) avoid PayPal fees. That could get the seller banned.

[wuvvumsoc.livejournal.com]

I'd just raise your prices by $1-3 on your price sheet if the fees concern you, and just not say that the price raise was because of fees.

[harkthorn.livejournal.com]

I was wondering about this recently since in many communities that allow buying/selling items they'll tell you to note in your post whether fees are included in your prices or not, and of course most people will state "PP fees not included". There's the note in Paypal's terms about handling fees, as someone mentioned above, but I'm not entirely clear what specifically would be okay to classify as such. Could digital items (artwork say) have handling fees at all?

[teatimedoodles.livejournal.com]

That's what I'm wondering myself! I'm also wondering if the handling fees count if you only use PayPal for your transactions.

[chronidu.livejournal.com]

Just seconding what others have said, I just raised my price to cover what id be losing in fees a long time back and went with that.

[revalie.livejournal.com]

I had an artist try to pull this on me recently. When I told her it was against ToS to make clients pay the fees, she told me that she would just call it a "processing fee" and I had to pay it anyway. Which was hilarious because I almost ALWAYS tip artists anyway, to help with the fees. So I just didn't work with her and she got none of my money.

You should possibly tell your friend that she'll lose out on quite a few customers this way. Anyone who knows Paypal's rules even the slightest bit is not going to work with someone like this.

[teatimedoodles.livejournal.com]

That's essentially what this person is trying to do, basically calling it a handling fee to justify it.

Another user is going to poke PayPal about this though because we're not certain if that actually counts.

They're being pretty stubborn about this so far, which is really sad since even I have been put off doing any further business with them because I don't want risk my account, nor do I want to be responsible for any damage to theirs.

[revalie.livejournal.com]

I almost feel like we're talking about the same person due to just how adamant this artist was when I tried to politely inform them that it was against the rules. It's really sad to see something like this. Even if Paypal would allow a "processing fee", all they have to do is raise their prices by a few dollars to make up for it. Smh.

[exo-formicidae.livejournal.com]

unfortunately there are very many that are this stubborn about it :/ I have a friend who I pointed it out to and she was all "oh thanks!" and rewrote that info - but then I checked by a day later it was back to how it was before. So I just quietly un-watched them and went my own way ^^;

[teatimedoodles.livejournal.com]

Sadly it looks like quite a few artists do it this way. Like someone above said, the handling fee is more likely to apply to physical goods because of shipping, etc, whereas for digital goods such things shouldn't be required.

[magedragonfire.livejournal.com]

I do know exactly who you're talking about, and I've had this exact discussion with them before. They're very adamant about not paying the fees as part of the cost of doing business, for some reason.

I think half of it may be that they're unwilling to raise their commission prices - and considering that they're very cheaply priced to begin with, comparatively, it would be a great idea for more than just fee-coverage. I suppose they figure that raising prices may lead to losing business - which is rather silly, considering I'd be more than willing to pay for a commission that was raised by $5 or $10 that is fully covered by Paypal's business agreement, and I'm sure there are others of like mind.

It's a pity, because I really do like the person's art, and would love to commission them! But I'm not willing to, as long as they're not willing to handle their transactions properly.

[kjorteo]

Charging the customers fees to get out of raising prices is especially silly because you're charging the customer more either way, but one way just looks a lot skeevier and is totally against PayPal's TOS.

"Commissions for $10! (Note: Please also include $2 to cover PayPal fees)"
"Commissions for $12!"

Like, both get you to the exact same point, but one is actually legit. It... shouldn't be that hard?

[magedragonfire.livejournal.com]

Pretty much! But I guess the thinking is that, if they do decide to raise prices, that is 2 more whole dollars they could have in their pocket instead of in Paypal's, whereas they'd have a fraction of a dollar extra otherwise!

Or something. I really don't get it.

[kjorteo]

Honestly, if any artist is so hard-up that a dollar or less is actually significant, just sucking it up and raising your prices would get you MORE money, by a few cents. Like (warning, completely random made-up pulled-from-nowhere numbers alert) charging an extra $1.46 on top of your listed prices can cover the fee at the cost of looking suspicious as hell... OR just raising your price by $2 will cover that fee AND give you an extra 54 cents!! :O

These artists are giving red flags to customers whose business they probably would have wanted and running the risk of getting in trouble with PayPal just to pursue the option that will give them less opportunity to keep a little extra per transaction! I don't get it. 6_9

[kaputotter.livejournal.com]

It only makes sense to be stubborn about rounding to whole amounts when you're handling cash, and even then only vaguely, because you're still going to have to be making change for people. And even if you're on a dealer room floor or marketplace you have to deal with taxes. It's just a fact of life eh? But in our modern age when we can pay with digital numbers, $2 is not that much of a price hike to cover a $10 sketch (making it a straight up $12 asking price I mean).

The thing about the PayPal policy is they only nab you when you mention covering the fees in the description. So it only makes sense to encourage artists to quietly include the fee in the price, so no one makes this mistake, whether it's the artist in an invoice, or the client if they send the money on their own.

[amarafox.livejournal.com]

When I did a lot of art via paypal, I just claimed the fees as a business expense on my taxes.

I won't buy from an artist that charges the fees. Suck it up as a business expense or, if you're running so close to the margin you can't afford an extra 2%, raise your prices.

[hbruton.livejournal.com]

Those fees are part of the business of using Paypal. I don't try to wiggle out of it. I use the service a lot and expect them to make money somehow. It's not a huge amount to my mind. At the end of the year I add up the fees and claim in on my taxes as a business expense. Sometimes my buyers add in a little extra to cover the cost and that's nice of them to do. But I never expect it and certainly never ask for it. I appreciate the service paypal offers and pay my fees and consider it part of doing business.

[kaputotter.livejournal.com]

Quite so!

[teekchan.livejournal.com]

I, and many of my friends, will flat out not work with artists charging the fee, as Paypal can shut down you account too, because by paying it you are breaking the rules.

Paypal fees are a tax deduction too, and as all artists should be paying taxes, you never really 'lose' that money, as its 100% deductible.

[roxyfur.livejournal.com]

Like teekchan said, paypal fees are tax deductible and they could save a ton of money on their taxes for writing it off as such! That's what I'll be doing this upcoming year. As a digital artist, it can be difficult to find things to write off, but this is one that you can for sure.