What is a 'Third-Party Transaction'
A third-party transaction is a business deal involving a buyer, a seller and a third party. The third party's involvement varies with the type of business transaction. For example, an online payment portal, such as PayPal, acts as a third party in a retail transaction. A seller offers a good or service, and a buyer uses a credit card entered through the PayPal payment service. The payment is run through a third party, and is therefore a third-party transaction.
BREAKING DOWN 'Third-Party Transaction'
Third-party transactions are important for various accounting policies and occur in a variety of situations. Importantly, the third party is not affiliated with the other two participants in the transaction. For example , if Firm A sells inventory to its subsidiary, Firm B, a third-party transaction occurs when Firm B sells those final goods to Firm C.