Swipe Fees Do Not Apply To Taxes And Tips In Illinois

By Rachel Gignac

Swipe fees will be prohibited on sales tax, state excise taxes and gratuities in Illinois, according to the Interchange Fee Prohibition Act. The act was included in the state's budget, which the Illinois House passed Wednesday. Illinois Gov. J.B. Pritzker has indicated he will sign it, the National Association of Convenience Stores said.

As part of Pritzker’s budget proposal, he included a provision to cap the tax discount claimed by retailers at $1,000 a month, which would generate more revenue for the state but at the expense of Illinois retailers.While other states have considered this type of legislation, this is the first time it has passed into law, marking a notable victory for retailers seeking relief from swipe fees, the convenience-store association said.

When retailers collect taxes for the state, they are charged swipe fees from credit card companies for the total amount, including taxes. In turn, retailers have to make up for the fees that were taken out of taxes and use their own money to provide those funds to the government.

Sen. Dick Durbin (D-Illinois), who proposed the Credit Card Competition Act, is in support of the Interchange Fee Prohibition Act.