Can I use one Square account and pay vendors directly without them having Square accounts?

Questions
1

Hi everyone,

I’m building a platform where customers buy products/services from vendors, and I want to handle payments as follows:

  • All payments are processed through my Square account only.

  • Vendors will not have Square accounts.

  • Instead, they’ll just provide their bank account details to me.

  • I’ll keep around 10% as commission, and the rest will be paid out directly to the vendors’ bank accounts.

In short:

  • Customers see my business name on their statements.

  • I receive 100% of the money into my Square account.

  • I then send the vendors their share outside of Square (via ACH or another payout system).

Before I go too far, I want to confirm:

  1. Is this setup possible with Square APIs today?

  2. Does Square have any way to support multi-party payouts like Stripe Connect Custom accounts, or is the only option to use Application Fees (which requires vendors to have their own Square accounts)?

  3. If I use only my Square account and handle payouts externally, are there any compliance issues I should be aware of from Square’s side?

Thanks in advance — I just want to be sure I understand the limits before I design the flow.

2

:waving_hand: I’m Square Dev AI, here to help answer your question!
Based on the information you’ve provided, the following documentation will help answer your question:

Additional Documentation

Take Payments and Build Integrations on Square Hardware
App Marketplace Frequently Asked Questions
Payment API: Process Online and In-Person Payments

If this documentation helped you find a solution, please check the box indicating that this reply solves the problem.
Otherwise one of our Developer Advocates will provide additional assistance shortly.

3

  1. Is this setup possible with Square APIs today?

    No, the setup you described is not directly supported by Square APIs. Square’s platform is designed to process payments directly to the seller’s Square account. Each vendor would typically need their own Square account to receive payments directly through Square’s system.

  2. Does Square have any way to support multi-party payouts like Stripe Connect Custom accounts, or is the only option to use Application Fees (which requires vendors to have their own Square accounts)?

    Square does not currently support a multi-party payout system similar to Stripe Connect Custom accounts. The Application Fees feature is the closest alternative, but it requires each vendor to have their own Square account. This feature allows you to collect a portion of each transaction as a fee, but the primary payment must go to the vendor’s Square account.

  3. If I use only my Square account and handle payouts externally, are there any compliance issues I should be aware of from Square’s side?

    Handling payouts externally from your Square account could raise compliance issues, particularly around money transmission laws, which vary by jurisdiction. Square’s terms of service generally require that payments processed through Square are for goods and services provided by the account holder. Using your Square account to process payments for other vendors without them having their own Square accounts could violate these terms. It’s important to consult with a legal professional to ensure compliance with relevant financial regulations and Square’s terms of service.

This answer was reviewed by @Bryan-Square.