PayPal Goods and Services is the payment type used whenever money is exchanged for a product or service on the platform. The seller pays a transaction fee of 2.99% plus $0.49 on domestic U.S. payments, and in return the buyer gets access to PayPal’s Purchase Protection if the item never arrives or shows up materially different from what was advertised.1PayPal. PayPal Merchant Fees2PayPal. PayPal’s Purchase Protection Program Those two features, the seller-side fee and the buyer-side protection, are what separate Goods and Services from the fee-free but unprotected Friends and Family option.
What Counts as a Goods and Services Payment
Any PayPal payment where someone is paying for something and someone else is expected to deliver falls under Goods and Services. Physical items, digital products like software or design files, and professional services all qualify. Friends and Family, by contrast, is meant for splitting a dinner tab or sending a birthday gift, situations where nothing is being sold.
The label is not cosmetic. Marking a payment as Goods and Services triggers the fee, activates Purchase Protection for the buyer, and creates a transaction record PayPal can use for dispute resolution and tax reporting. Friends and Family payments do none of those things.3PayPal. What’s the Difference Between Friends and Family or Goods and Services Payments
What Sellers Pay
The buyer pays nothing extra when sending a Goods and Services payment. The seller absorbs the fee, which PayPal deducts before depositing the balance.3PayPal. What’s the Difference Between Friends and Family or Goods and Services Payments
Domestic Transactions
When both parties are in the United States, the fee is 2.99% of the total plus a flat $0.49.1PayPal. PayPal Merchant Fees On a $1,000 sale, that comes to $30.39, leaving $969.61. On a $50 sale, the same fee structure takes $1.98, which is a much larger bite as a percentage. Sellers who price without building in the fee end up eating it on every sale.
International Transactions
Cross-border payments add 1.50% on top of the domestic rate, for a total of 4.49% plus the $0.49 fixed fee.1PayPal. PayPal Merchant Fees If a currency conversion is involved, PayPal applies an additional spread of 3.00% to 4.00% on the exchange rate depending on the transaction type.4PayPal. PayPal US Fees Selling internationally can easily cost 7% or more once the transaction fee and conversion markup are combined.
Refunds Do Not Return the Fee
If you refund a Goods and Services payment, PayPal keeps the original transaction fee. This applies whether the refund is full or partial.1PayPal. PayPal Merchant Fees A $500 sale that falls through still costs the seller roughly $15.44 even though no sale actually took place. Sellers with high return rates should account for this in their pricing.
Holds on Funds for New Sellers
New sellers should not expect instant access to their money. PayPal routinely holds funds for up to 21 days while a seller builds a track record of successful transactions.5PayPal. Why Is Your PayPal Payment on Hold The hold protects buyers but can create cash-flow problems if you need those funds to ship the item.
You can speed up release by uploading tracking from a supported carrier, confirming your identity, and avoiding disputes and chargebacks. Printing a shipping label through PayPal helps because tracking data links to the transaction automatically.5PayPal. Why Is Your PayPal Payment on Hold
Purchase Protection for Buyers
Purchase Protection is the reason to always use Goods and Services when paying someone you do not personally trust. It covers two situations: you paid for something and it never arrived (Item Not Received), or what you received is materially different from what was advertised (Significantly Not as Described).2PayPal. PayPal’s Purchase Protection Program
Eligibility
To qualify, your PayPal account must be in good standing, the payment must have come from your PayPal account, and you must have tried to resolve the issue with the seller first. You also need to respond to any documentation requests PayPal sends during review.2PayPal. PayPal’s Purchase Protection Program
Filing Deadlines
The two claim types have different windows. For an Item Not Received claim, you have 180 days from the payment date to open a dispute. For a Significantly Not as Described claim, the window is 30 days from delivery or 180 days from payment, whichever comes first.6PayPal. Dispute Filing Timeframes That 30-day clock on quality disputes is the one people miss. Inspect items promptly rather than letting them sit unopened.
What Is Not Covered
The program excludes vehicles, real estate, financial products and investments, cash equivalents like gift cards, gambling-related transactions, donations, and government payments. Custom-made items are excluded from Significantly Not as Described claims, so a commissioned painting you dislike likely gives you no recourse. Items picked up in person are excluded from Item Not Received claims unless you paid at the seller’s location using PayPal’s Goods and Services QR code.2PayPal. PayPal’s Purchase Protection Program
Digital goods are generally eligible. Proving that a digital product was never delivered or did not match its description is harder than photographing a damaged package, so keep screenshots and records of exactly what was promised.
How to File a Dispute
Start in PayPal’s Resolution Center from your account dashboard. Select the transaction, describe the problem, and PayPal will notify the seller and open a communication window for you to negotiate directly.
A dispute is not the same as a claim. During the dispute phase, PayPal stays out of it and lets the two sides work things out. You must wait at least 7 days from the payment date before you can escalate to a formal claim, which asks PayPal to step in and decide. If you do not escalate within 20 days, the dispute closes automatically and cannot be reopened.7PayPal. How Long Does It Take to Resolve a Dispute or Claim This is where claims die most often. A buyer opens a dispute, assumes PayPal is handling it, and lets the 20-day window expire.
When you escalate, PayPal reviews the evidence both sides provide. The strongest evidence for a buyer includes the original listing or invoice showing what was promised, clear photos or video of what actually arrived, and messages with the seller documenting your attempts to resolve the issue. For Item Not Received claims, check carrier tracking before filing. If tracking shows delivery to your address, the claim will likely fail and you will need to pursue the carrier instead.2PayPal. PayPal’s Purchase Protection Program
Seller Protection
Sellers have their own program, though qualifying takes more work than for buyers. Seller Protection covers two scenarios: a buyer claims the item never arrived, or a buyer claims the payment was unauthorized.
Your PayPal account must be based in the United States. The transaction must be marked “eligible” or “partially eligible” on the Transaction Details page. You must ship to the address on that same page, and you need to respond to PayPal’s documentation requests.8PayPal. PayPal’s Seller Protection Program
For Item Not Received claims, you need full proof of delivery: an online-verifiable tracking number, the delivery date, a “delivered” status, and a recipient address matching the Transaction Details page. For unauthorized payment claims, proof of shipment is sufficient, but the item must ship no later than two days after PayPal notifies you of the dispute.8PayPal. PayPal’s Seller Protection Program Carrier choice matters. If the carrier cannot provide a “delivered” status at the correct address, especially on international shipments, the claim may be denied even if the buyer actually received the item.
Tax Reporting and the 1099-K
PayPal reports Goods and Services income to the IRS once you cross certain thresholds. For 2026, a 1099-K is triggered when you exceed both $20,000 in gross payments and 200 transactions in a calendar year.9Internal Revenue Service. Publication 1099 (2026) Both conditions must be met. Hitting one but not the other means no form gets filed.
U.S. sellers must provide a Taxpayer Identification Number, which can be a Social Security Number, Employer Identification Number, or Individual Taxpayer Identification Number. If you don’t provide one, PayPal may place a hold on your account and apply 24% backup withholding. Sole proprietors and single-member LLCs should use the owner’s personal SSN.10PayPal. How Will PayPal Use My TIN or SSN and How Do I Add It
A 1099-K does not automatically mean you owe tax on the full amount. The form shows gross payments before fees, refunds, and cost of goods. You report the income on your tax return and deduct legitimate business expenses against it.
Why You Should Not Accept Friends and Family for a Purchase
Sellers on marketplace platforms and social media sometimes ask buyers to send Friends and Family payments to sidestep the 2.99% fee. Friends and Family payments are completely excluded from Purchase Protection. If the seller never ships the item or sends something worthless, PayPal will not intervene or refund the money.3PayPal. What’s the Difference Between Friends and Family or Goods and Services Payments Recovery is then your problem, and realistically that means the money is gone. A legitimate seller treats the fee as a cost of doing business.