Prohibits credit and debit card interchange fees from being applied to sales tax and gratuity.
Summary
Assembly Bill 5014 would prohibit payment card networks from charging interchange fees on the portion of an electronic payment transaction attributable to sales tax or gratuity, so long as the merchant transmits that tax or gratuity information during authorization or settlement. The bill defines key terms such as credit card, debit card, payment card network, merchant, interchange fee, tax, and gratuity, and it applies to transactions processed through electronic payment systems.
If a merchant does not initially transmit gratuity data, the bill allows the merchant to submit that information within 180 days after the transaction, after which the payment card network must credit back the interchange fees charged on the gratuity amount within 30 days. The bill also bars payment card networks from shifting fees to other parts of the transaction to evade the prohibition, and it disclaims liability for inaccurate merchant-reported tax or gratuity data.
Impact
The bill would amend and supplement Title 56 of the Revised Statutes by creating a new rule governing how interchange fees are calculated on card transactions involving sales tax and gratuities. It would directly affect payment card networks, issuers, processors, and merchants that accept debit and credit cards and collect sales tax, especially restaurants and other service businesses where gratuities are common. Violations would expose payment card networks to a civil penalty of $1,000 per electronic payment transaction and require refunds of improperly charged interchange fees.
Sentiment
The stated purpose of the bill is generally favorable to merchants, particularly small businesses in the service industry, by reducing card-processing costs tied to tax and tip amounts. The bill statement frames the measure as business relief that could help owners invest, hire more employees, and continue serving their communities. No committee transcript or vote record was provided, so there is no additional evidence of formal support or opposition beyond the bill’s pro-business framing.
Contention
The main policy issue is whether payment card networks should be allowed to assess interchange fees on amounts that are not part of the merchant’s revenue, namely sales tax collected for the state and gratuities paid to employees. Supporters are likely to emphasize lower costs for merchants and fairness in fee calculation, while opponents may argue that the bill interferes with card-network pricing, creates compliance and data-reporting burdens, or could lead networks to adjust other fees. The bill also raises operational questions about how merchants transmit tax and gratuity data and how disputes over accuracy would be handled, though the text limits network liability for merchant reporting errors.
Enacting the consumer inflation reduction and tax fairness act and exempting the portion of a credit card transaction constituting a tax or gratuity from assessment of the fee charged by the card issuer.