Legal Question in Tax Law in California

My friend can't get a Paypal account due to his bad credit and has asked me if he could use mine so his customers can pay by American Express on his e-commerce site. He has offered to pay me a fee for every transaction that is made. Is is legal for him to use my Paypal account for this purpose? If it is legal, how do I make sure I am not on the hook for any taxes that may apply? When I asked him about this he said I could issue him a 1099. I am not 100% sure about his advice. Thanks in advance for your help.


Asked on 5/26/13, 8:29 am

1 Answer from Attorneys
William Christian Rodi Pollock

I would be cautious. Since a paypal account does not really require a credit check, why is he not able to open one on his own? They are not loaning him money, but collecting it. Is he asking you to use your credit facilities to pay for merchandise he is then selling? If other lenders won't do so, why are you willing to take that risk. Have you thought about what happens with customer returns? Sounds like for a small fee you may be taking some of the business risk for his venture. Honestly, I would be more concerned about your liability in doing this than the tax issues.

You would pay tax on any fee you are paid.

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Answered on 5/28/13, 10:51 am


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