Relates to excluding taxes from the amount on which credit card transaction fees are based

Showing the cosponsors who are on Agora, A to Z. The official record may list more.

• Democratic30
• Republican22

This bill has cosponsors from more than one party.

Shown in neutral colors by design; Agora is non-partisan.

◆ The sponsor's argument

Why James Skoufis says this is needed

The COVID-19 pandemic significantly accelerated New Yorkers' transition from cash to credit and debit card payments. While this shift offers convenience, it imposes substantial financial burdens on small busi- nesses, the state, and tipped workers. Each time a payment card is used, merchants are charged transaction fees, which have risen sharply due to increased utilization and inflation. Because these fees are calculated as a percentage of the total transaction cost, they escalate with every price increase. For many retailers, interchange fees are their second-largest operating expense, surpassing only labor costs, rent, and utilities. On Visa and Mastercard credit transactions, the average interchange rate in the United States is approximately 2.25% of the transaction amount. This rate is more than seven times higher than what merchants pay in Europe and five times higher than the fees in China. Interchange (swipe) fees are currently applied to the full transaction amount, including state and local sales taxes. Sales tax revenue is remitted to the government and does not constitute business income; however, credit card companies continue to charge processing fees on the entire amount, effectively diverting funds away from merchants and the state. This bill seeks to alleviate these financial pressures by exempting state sales taxes and gratuities from calculating interchange fees. Under this proposal, the net sales amount calculated by subtracting sales tax and gratuities from the total transaction would determine processing fees. In the 2021-2022 fiscal year, New York State collected $18.6 billion in state sales tax and $22 billion in local sales tax. According to a study by the Federal Reserve Bank of San Francisco, approximately 58% of tran- sactions in the U.S. are conducted via credit, debit, or app-based payment methods, with an average interchange fee of 2.25%. Removing sales tax from the swipe fee calculation could save businesses and consumers nearly $529.7 million annually. Nine states Florida, Georgia, Idaho, Maine, Mississippi, North Dakota, Tennessee, Texas, and Washington have introduced legislation to exclude sales tax from interchange fee calculations. Illinois enacted legis- lation in 2024 to exempt sales taxes and gratuities from such fees. This bill extends similar relief by including gratuities in the exemption. It recognizes that imposing processing fees on tips directly impacts tipped workers' earnings. By ensuring that gratuities remain fully intact, this legislation safeguards employees' financial well-be- ing who rely on tips as a significant portion of their income. This measure represents a crucial step toward reducing unnecessary financial burdens on businesses, protecting workers' earnings, and ensuring that excessive processing fees do not erode state and local tax revenues.

This is the sponsor's own case for the bill, quoted from their memorandum. It is not Agora's description of what the bill does.