Yep.
Definitely illegal.
Now enjoy my rant / novel 
This particular subject has always been a "pet peeve" of mine, especially since many sellers acknowledge the facts, learn something they possibly didn't know that is illegal and inadvertently taking advantage of their customers and STILL continue to do it.
But hey, some learn..... Some dint. Even I charged people the 3% fee when I first started selling products online as a first time Ebay user. It lasted all of a few weeks until I was setting up a merchant account for a retail location and was presented with all the fees and rental fees and decided to read paypals fine print. The good people who ripped us off and supplied our merchant account told us that charging such fees is prohibited and punishable by law, the good people at paypal never mention it when applying and hide it in their TOS.
Anyways... Not only is it a direct violation of paypals terms of service and if reported could cause a lock or loss of your account, but it is also punishable by law on a federal and state level.
PayPal does not actively go out enforcing it for obvious reasons. Simply put, too many damn people do it..... And most of them are not aware it is illegal. It is a "fad" that started on Ebay mainly. One person who was concerned with covering a small loss probably got the bright idea to charge their customer for the luxury of accepts their payment online and I'm sure it caught on like wildfire. These are not business owners in most cases, these are people selling things online to make a few bucks and they are unaware of such legal matters and details regarding running a business.
You definitely do not see the big power sellers and companies charging such a fee.... Because they know its very poor business and could have major consequence. In order to accept online payments through paypal or a merchant account, hell.... to accept credit cards and checks at a retail location.... you need to rent equipment or buy it outright. You then need to pay a fee similar to that of paypals to accept these types of payments. It is basically one of the costs of doing business. Charging your customer extra so you can take their money doesn't sound very ideal from a customers point of view now does it? Certainly many people will do with no questions asked, or even send it to you in addition to your requested total because they are sumply used to it by now from other sellers. Either way, its simply wrong.
Also, another aspect of it.....
Some people do it to intentionally scam unsuspecting customers who do not know any better. If you send such a paypal payment to someone that simply has a personal account... guess what? Personal accounts are very restricted, they can only send send or spend so much money every month. They are usually very small accounts for parking a bit of cash to make online purchases, but some people who run businesses will verify these accounts to raise spending and withdrawl limits and use them as business accounts without actually upgrading to a business account.
Still don't know where I'm going with this? Here is the kicker.....
Personal accounts do not get charged fees when accepting payments. They are basically pocketing your money under false pretense. Granted it may not be much, but its still ads up... especially for those who squeeze the most out of personal accounts for their small business. Not a HUGE deal but it still happens. Kinda similar to those who overcharge for shipping. Now, the specifics regarding personal accounts are that they accept all payments except for credit card payments free of charge, so if someone uses bank funds, or their cash balance (as in most cases) they are basically sitting back and pocketing and EXTRA 3% above and beyond the total shipped price of every sale. Premier and business accounts are fee based......
In the real world retail outlets, ever your corner mom and pop pet shop.... factor these fees right into the asking price for the product.... If you walked into a petco, saw the price for the item, had to pay tax, and then they told you that you had to pay them an additional fee so they will accept your money you'd probably spit in their faces.... lol
Anyone with any experience in retail business legitimately can tell you because they've had to go through all the trouble setting everything up to accept these additional forms of payments from their customers.
The internet in a way made this process too easy. anyone with a computer and an internet connection can hop on, open a paypal and Ebay account, and sell things. They are in "business". No real red tape, no caution signs, no reason to think they cant. They are shocked when they see that paypal is taking a chunk out of the money they have earned and rather than take a loss they see others collecting extra for them and its the most logical solution to them. Problem Solved! It would be nice if paypal and Ebay made it more obvious instead of hiding it in fine print. It's basically like settings them up if one day they began to enforce it in a stronger manner.
Some confirmation so you do not think anyone is blowing smoke up your ass:
quoted here:
https://www.paypal.com/us/cgi-bin/w...cy_fees-outside
Receiving Payments. Personal accounts are not charged any fees for receiving payments, but may not receive credit card payments without upgrading to a Business or Premier account. Business and Premier accounts will be charged under the new performance-based fee structure, and the fees will be based on the country associated with the account.
quoted here:
https://www.paypal.com/cgi-bin/webs...n/terms-outside
No Surcharges. Under Visa, MasterCard, Discover and American Express regulations and the laws of several states, including California, merchants may not charge a fee to the buyer for accepting credit card payments (often called a "surcharge"). You agree that you will not impose a surcharge or any other fee for accepting PayPal as payment. This restriction does not prevent you from imposing a handling fee in connection with the sale of goods or services, as long as the handling fee does not operate as a surcharge (in other words, the handling fee for transactions paid through PayPal may not be higher than the handling fee for transactions paid through other payment methods). Nor does this restriction apply to Pound-denominated transactions by sellers residing in the United Kingdom listing items for sale on a UK-based website.
I am sorry for giving you the wrong information.
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