Does PayPal charge tax

PayPal does not charge or withhold income tax on your payments, but it charges transaction and service fees and reports certain business transactions to tax authorities.

How tax interacts with PayPal depends on what the money is for and where you live:

• Income tax: Profits you earn through PayPal from selling goods, providing services or freelancing are taxable, and paying that tax is your responsibility rather than PayPal's.
• Personal transfers: Money sent between friends and family through PayPal is not treated as taxable income.
• Form 1099-K in the US: PayPal reports payments for goods and services to the IRS on Form 1099-K when federal or state transaction thresholds are met.
• Income without a 1099-K: US sellers still have to report all business income on their tax return, even if PayPal does not send them a Form 1099-K.
• Fees and local tax: PayPal deducts transaction fees and currency conversion fees, and in some countries a local tax such as GST applies to those fees.

The deductions you see on a PayPal payment are therefore fees, not income tax. People comparing PayPal alternatives often look at how these transaction and conversion charges add up, since they can reduce the amount received.

Keep records of your PayPal business income and fees, because tax authorities expect you to declare your earnings whether or not PayPal has reported them.