Prohibits credit and debit card interchange fees from being applied to sales tax and gratuity.
S4360 would prohibit payment card networks from charging interchange fees on the portion of a credit or debit card transaction attributable to New Jersey sales tax or gratuity, so long as the merchant transmits that tax or gratuity data during authorization or settlement. The bill defines key terms such as payment card network, merchant, interchange fee, gratuity, and tax, and it applies only to electronic payment transactions covered by the Sales and Use Tax Act.
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 network must refund the interchange fees charged on the gratuity amount within 30 days. The bill also bars networks from offsetting the prohibition by increasing fees on the non-tax, non-gratuity portion of the transaction or by imposing other merchant fees to evade the law. Violations would trigger a civil penalty of $1,000 per electronic payment transaction, along with a refund of the improperly charged interchange fee.
The bill would supplement Title 56 of the Revised Statutes and create a new state restriction on how payment card networks calculate interchange fees for sales tax and gratuities in New Jersey. It would affect card networks, processors, issuers, and merchants that accept electronic payments and remit sales tax, especially restaurants and other service businesses where gratuities are common. The measure would take effect 180 days after enactment and apply prospectively to transactions on or after that date.
The bill is presented in supportive terms, with the statement emphasizing relief for business owners facing card-processing costs and potential benefits for small businesses in the service industry. No committee transcript or recorded vote is provided, so there is no documented opposition or formal legislative sentiment in the materials beyond the sponsor’s stated purpose. Overall, the available context suggests a pro-business, fee-relief rationale rather than a contested policy debate.
The main policy issue is whether payment card networks should be barred from collecting interchange fees on amounts that are not retained by the merchant, namely sales tax and gratuities. Supporters would likely argue that merchants should not pay card fees on money that is passed through to the government or to employees, while opponents or affected industry participants may contend that the bill interferes with network pricing and transaction processing practices. Another practical point is compliance: the bill relies on merchants transmitting tax and gratuity data accurately, and it expressly disclaims network liability for inaccurate merchant reporting.