Q. (cont.) How does a business protect itself from any liability resulting from use of a third party vendor handling AP if they are not under obligation to share their records with the client? Further, if a liability arises, what is the state that controls? The home state of the third party vendor, or the ultimate payee.
A. There are two basic questions here and the answers to both depend on additional particular facts. But the presenter offers the following:
1. Who is the true holder that would be obligated and subject to state unclaimed property law requirements?
This question hinges upon the contractual relationship of the business and the third-party payment provider. What type of arrangement would the business have with a third party that wouldn’t obligate the vendor to provide record of the payments the vendor is contractually liable to make? Is this a rebate situation? In most cases the business that creates the obligation is still considered the holder by state unclaimed property administrators.
2. Which state law applies?
This depends first upon whether there are names and addresses of individuals and entities to which the AP items are owed. If there are addresses, the state of the address of the owner would apply. If the owner is unknown, the state of the holder’s incorporation/domicile would apply, which takes us back to question #1 above: “Who is the true holder?”