Pennsylvania banks and credit unions are pushing back on proposed state legislation that would exempt the sales-tax portion of retail purchases from so-called swipe or interchange fees — the fees charged by financial services companies for processing credit card payments.
The fees are typically 1% to 3% of a transaction. Under the exemption, on a $1 purchase, the swipe fee would apply only to the $1, not to the extra 6 cents in state sales tax.
The legislation, House Bill 2394, was introduced on June 10 and was scheduled for a vote June 12 in the House Finance Committee.
Retailers, who have been pushing for an exemption since last fall, argue that they should not be charged swipe fees for sales-tax payments that they collect as a service for the state.
It is an argument echoed in a legislative memo seeking support for the exemption.
“Merchants are merely performing their state-mandated duty to collect and remit taxes and should not have to pay an additional cost to do so,” wrote state Reps. Greg Scott, a Montgomery County Democrat, and Steve Samuelson, a Northampton County Democrat.
Banks and credit unions argue that the exemption would lead to higher costs and potentially force retailers to collect sales taxes in separate transactions, to the detriment of consumer convenience.
“This legislation would actually make the payment system more complex,” said Kevin Shivers, president of the Pennsylvania Association of Community Bankers, who argues it is being pushed by large, big-box retailers.
He is joined by leaders of the Pennsylvania Bankers Association and CrossState Credit Union Association in opposing the legislation.
The trend: Credit card use has risen over the last several years, particularly in the wake of the Covid-19 pandemic.
As a result, the fees associated with card usage have become a target.
Retailers complain the associated interchange fees, particularly for sales taxes, are eating into their revenue.
Some legislatures have started to respond. In Illinois, for example, state lawmakers added a sales-tax exemption on interchange fees to a budget bill approved in May.
Financial companies argue that the fees cover the cost of processing electronic payments and maintaining the infrastructure that makes them possible.
The costs exist regardless of whether the fees are applied to sales taxes, and those costs would have to be absorbed somewhere, most likely by banks and credit unions, Shivers said.
