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kremisoski

Paypal Fees

kremisoski
Feb 2nd, 2016
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  1. Paypal Fees:
  2.  
  3. Fee - 30 cents plus 2.9%
  4. C = .30
  5. P = .971 ( 1 - 0.029 )
  6. T = Transaction Amount
  7. B = Amount Billed
  8.  
  9. a) The amount billed is the amount you're trying to receive.
  10. b) The transaction amount is the total you need to charge in order to receive the amount billed (a).
  11.  
  12. T = (B + C) / P
  13.  
  14. Example: You have worked 40 hours for XYZ Company for $50/hour and have it in your contract that they are responsible for your Paypal fees. Since forty times fifty is two thousand dollars, you need to calculate the amount to charge them in order to receive $2,000.
  15.  
  16. T = (2000 + 0.3) / .971
  17. T = 2000.3 / .971
  18. T = 2060.041194644696
  19. T = 2060.04 (using standard rounding rules).
  20.  
  21. c) So in order to receive $2,000, you would have to charge the client $2,060.04. The fee is $60.04. We can verify this, by calculating the fee for $2060.04 as follows:
  22.  
  23. F = Fee
  24. B = Amount Billed
  25.  
  26. F = B * 0.029 + 0.30
  27.  
  28. F = 2060.04 * 0.029 + 0.30
  29. F = 59.74116 + 0.30
  30. F = 60.04116
  31. F = 60.04
  32.  
  33. So the fee does in fact work out to be $60.04. (c)
  34.  
  35. Likewise, you may decide that you want to pay the Paypal fees yourself because the contract was for $2,000 and you made no stipulation that the clients were responsible for Paypal fees. You could just figure out the fee as I just did and then subtract that from the total amount, but I see no reason for the extra step of subtraction personally. For example, there is a 6% sales tax in the state of Michigan. If you made a purchase for $50, does it make more sense to multiply fifty times 0.06 and then add that number to fifty or does it make more sense to multiply $50 times 1.06 eradicating the need for a second step?
  36.  
  37. N = Net Total
  38. C = Contract Amount
  39. F = Fee
  40.  
  41. N = C * 0.971 - 0.30
  42.  
  43. N = 2000 * 0.971 - 0.30
  44. N = 1941.7
  45. N = $1,941.70
  46.  
  47. We can check our math much like we did in the previous problem:
  48.  
  49. F = C - N
  50. F = 2000 - 1941.70
  51. F = 58.3
  52. F = $58.30
  53.  
  54. So if we know the fee is $58.30, then we should be able to use the second equation to verify this is correct:
  55.  
  56. F = B * 0.029 + 0.30
  57. F = 2000 * 0.029 + 0.30
  58. F = 58.3
  59. F = $58.30
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