No Interchange Fees on Sales Tax or Tips
House Bill 650 would prohibit payment card issuers, payment card networks, acquirer banks, and processors from charging interchange fees on the portion of an electronic payment transaction attributable to North Carolina sales tax or gratuities, so long as the merchant identifies the tax or tip amount during authorization or settlement. If the merchant does not transmit that information at the time of the transaction, the bill allows the merchant to later submit tax documentation within 180 days and receive a refund of the interchange fee charged on the tax or gratuity portion within 30 days.
The bill also bars covered payment entities from shifting costs to the non-tax, non-tip portion of a transaction to evade the prohibition, and it authorizes the Attorney General to seek injunctive relief and civil penalties of $1,000 per violating transaction. It further creates a refund remedy for merchants and adds a data-use restriction on transaction data, making misuse of that data a violation of the state’s unfair and deceptive trade practices law.
The bill would add a new Article 52 to Chapter 66 of the North Carolina General Statutes, directly regulating how interchange fees are calculated and charged on card transactions involving state or local taxes and gratuities. It would affect merchants that accept card payments, as well as issuers, payment card networks, acquirer banks, and processors, while also defining a special category of covered credit card issuer based on asset size. The act would take effect October 1, 2025, and apply only to transactions on or after that date.
No committee transcripts or recorded votes were provided, so there is no direct evidence of debate, support, or opposition in the available materials. Based on the bill text alone, the measure appears designed to relieve merchants of paying fees on amounts they collect and remit as tax or receive as tips, which suggests a pro-merchant and consumer-facing rationale. The absence of voting history or discussion prevents a reliable assessment of broader legislative sentiment.
The main likely point of contention is who should bear the cost and administrative burden of separating tax and gratuity amounts from the rest of a card transaction. Merchants may favor the bill because it could reduce processing costs, while payment card networks, issuers, acquirer banks, and processors may object to the operational complexity, refund obligations, and exposure to civil penalties. Another potential dispute is the documentation requirement and the 180-day retroactive refund process, which could raise concerns about compliance, verification, and data handling. The bill’s restriction on altering fee calculations to offset the prohibition, plus its data-use limits, may also be contentious for financial institutions and payment processors.