Small Business accepting payments and asking customers to choose friends and family option

[brodeo]

If a small business (like my son's preschool) accepts payments over PayPal, do they have a legal liability via PayPal's terms of service, to pay the merchant fee when I send a payment to them? I have found it common for some small business, like a small home-run preschool, to accept paypal, and request that we send them money using the Friends & Family option so they avoid paying the fee.  If the difference is simply about liability and purchaser protection, then yes, I trust the pre-school, and have no problem waiving the fee for them.  But if since they are running a business, they have a legal obligation to pay the fee as part of utilizing paypal to accept payments, I would rather do that.  Not to harm their business or bottom line, simply because I want to do whatever the right thing is.  If PayPal has no issue if I pay for my services to a business using the Friends & Family option to allow them to avoid fees, then I am ok with that.  I just want to make sure PayPal is ok with that too.

[Valerieeee]

If they provide child care to you as a business, then yes, they are suppose to pay the tax because they are providing you services. They're just trying to avoid it. Now say if they occasionally care for your child so you can go out for an evening, then no, because then that would be a friend agreeing to babysit and you just paying them for it to say thank you.

[brodeo]

Right, I get that.  I think in this case they just don't understand what those fees are for.  So you are saying it is against PayPals terms for a business to accept money in that way? I have seen other threads in this community that seem to say the exact opposite.

https://www.paypal-community.com/t5/About-Payments-Archive/What-is-difference-between-paying-a-frien...

Can you clarify?

[nevadasmith]

if they are running a business,they should open a business Paypal account and pay Paypal fees,if they do not,they could be caught for fee avoidance and have their account restricted.

also if you want buyer protection,you should send payment as business not friend and family.

there is also tax ,Paypal will send 1099 if they have 200 transactions AND $20K that year.