State legislatures across the country have introduced
legislation excluding sales tax from interchange fee
assessments. These bills include Mississippi - MS HB 1076/SB 2856, Oklahoma - OK SB 798, and Tennessee - TN HB
375. Interchange fees, sometimes labelled as ‘swipe
fees’, are an essential part of the electronic payments system, ensuring
its safety and functionality. This fee helps pay for the benefits merchants
receive from accepting electronic payments, including credit unions’
investments to protect consumers’ data and prevent fraud.
Merchants
reap huge benefits from accepting payment cards, including increased sales
opportunities, less fraud, guaranteed payment, and faster payment.
Now, they want to shift their business costs to consumers and financial
institutions in an effort to bolster their profits.
Excluding
sales taxes from interchange fee assessments fails to address the risk credit
unions accept through the electronic payments system. Credit unions still bear
the credit risk for the entire transaction. As a result, merchants may see
their costs increase for the underlying transaction. That’s why
interchange is part of the cost of doing business—the cost of accepting payment
cards.
Similar
legislation has been proposed and considered in the past, and each one was
uniformly rejected in its committee of reference due to harm to consumers, loss
of sales tax revenue, legal deficiencies, and operational hurdles. We
will keep you posted on any new developments. In the meantime, if you have any questions or comments, please feel free
to contact Madison Rose.