third-party payments
Definition
A third-party payment happens when someone other than you or your customer pays for a good or service involved in your transaction. Think of it as a middleman with a wallet, where a separate person or company steps in to handle the money instead of the buyer paying the seller directly. This is extremely common in business, covering everything from insurance reimbursements to payment processors like PayPal or Stripe handling your customer transactions.
Example
A customer buys a product from your store and pays through PayPal, which collects the money and then sends it to your business account, making PayPal the third party in that transaction.
Watch Out
You need to track third-party payments carefully because tax authorities like the IRS require you to report income even when someone other than your customer sends you the money.
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This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.