Get Informed on Swipe Fee Fairness

Why Swipe Fees on Sales Tax is Unfair

Introduction

Whether you know it or not, “swipe fees” impact nearly every consumer, dramatically impacting the finances of American families, businesses, and workers.

Swipe fees on sales tax and tips significantly impact Connecticut and its people. Senate Bill 1460 seeks to eliminate these fees, relieving businesses of this burden and keeping these fees in Connecticut. Currently, these fees go to global card networks and multinational banks.

Sales Tax and Swipe Fee Fairness for Retailers

• Connecticut’s retailers, restaurants, and hotels are private partners with the State of Connecticut, collecting and remitting sales tax.
• Any CT business that accepts a debit or credit card must pay “interchange” or “swipe” fees that are set by the global networks (Visa, Mastercard, etc.).
  • These fees are set by the global networks, and they are not negotiable.
  • U.S. retailers pay the highest swipe fees in the industrialized world.
  • In Connecticut, the swipe fees range from 2% to 4% of the total transaction amount, including sales tax.
  • These fees add up to more than $100 million each year for CT businesses.
• Our businesses are collecting sales tax for Connecticut, submitting that sales tax to the state for free – without any remuneration – and then must turn around and pay the banks a fee set by the global card networks for collecting that tax.

Charging the swipe fee on the sales tax portion of purchases is unfair and levies more than $110 million in added costs on the backs of Connecticut’s local businesses.

• The Federal Reserve estimates that more than 60% of consumer transactions are either credit or debit, and U.S. retailers pay more than $10 billion in interchange fees on just the sales tax portion of the transaction.

Please support legislation that removes Connecticut sales tax from the swipe fee calculation.

• Any business that can already separate sales tax from the base price of purchases will be able to make this change easily and affordably. Most retailers can already do this because they’re required to do it for transactions such as those made on state agency credit cards or some WIC and SNAP transactions.
• We recognize this will require the banks to make adjustments to their current processing systems. It will also require some businesses to make adjustments. However, the benefits in long-term savings will outweigh the costs, and removing sales tax from swipe fee computation will make Connecticut’s law fairer and more reasonable to our state merchants.