PayPal Friends & Family listings. Why is this becoming so common?


I think most sellers now realize they are not going to have a taxable profit. 

The F&F listings at market price don't seem to sell. 

It seems like buyers demand around a 20% discount to take on the added risk of F&F. 

I'm really just curious to hear what buyers & sellers think of this practice.  

seanheis1

Another thing to consider: Venmo is secure in the sense that buyers cannot stop or reverse payments, so once it's in your Venmo it's good as cash.

Except when it's not. There's a loophole that goes like this: if - and only if - the Venmo transaction was backed by a credit card and the cardholder disputes the charge with his card's issuer, that dispute takes precedence over Venmo's own T&Cs, and Venmo will reverse the payment (could be one or two months after the fact) and take the money out of your account while the dispute is being investigated. Then the card issuer may or may not find in your favor, and if they don't then you're out the money.

It can happen with Paypal too, because (a) this loophole is based on federal regulation so it applies to all payment providers, and (b) PayPal itself mentions it, however opaquely, in the T&Cs of its buyer protection program.

tt does not matter whether the disputed transaction took place under Goods and Services or Friends and Family.

It would not necessarily be fraud, it could just be a dispute over the goods sold. But the process is kind of onerous, so if you've sold something for $200 you're most likely safe.

What I know is based on experience that's two years old. Rules may or may not have changed since.

 

I used to use PP G/S when selling and I would gladly pay the fee. The 1099 crap makes it challenging to use it- but I understand the buyer's dilemma.

I've been burned, once paying with F&F. So now I offer to pay the fee, I add 3.5% to the total, and go with Goods and Services if the seller agrees. Selling used items seldom makes a profit, so no income... What I don't understand is how sales tax can be added to a transaction between two individuals. Anyone who can explain?

@puptent I think it is because it is a transaction, money changes hands, and the government has the opportunity to tax you. Think about it, sales tax (sales transaction), income tax (payroll transaction), interest (dividend transaction), 401k (distribution transaction), inheritance (probate transaction). If money is changing hands, the government wants a cut of the action, we call it taxes. 
Note: Those rich enough to have unrealized capital gains, that is to say, there has not yet been a sales transaction from which they have profited, can borrow against their unrealized gain at ridiculously low interest rates (like 1%), and avoid paying any tax because there has been no ‘transaction’ in the classic sense of money changing hands, it has only been ‘cleaned’ by the bank. 
At least those are my thoughts on the issue, someone more informed on matters of high-finance may choose to enlighten us further and/or refute my claims.