PFMA members, allies urge House committee to exempt “swipe fees” from being charged on state sales tax collections
At a hearing of the Pennsylvania House Finance Committee this week, Linda Smith, payments manager for Pennsylvania Food Merchants Association member/sponsor Sheetz, along with the payments reform advocate John Drechny, CEO of the Merchant Advisory Group, testified in support of legislation to prohibit credit card networks from charging “swipe” fees on the sales tax collected and remitted to the state by retailers in Pennsylvania.
Unknown to most consumers, merchants are charged a fee averaging over 2% of the transaction – including the sales tax – every time a customer pays by credit card.
“For more than 70 years, Sheetz has been a valued partner with the state collecting sales tax,” Smith told committee members. “However, with the proliferation of credit card payments and under the current swipe fee system, we are now penalized for it.”
Sheetz estimates that the company has paid more than $1 million to credit card companies over the past year simply for processing the sales tax portion of credit card transactions.
“We should not be charged a swipe fee on funds we are not keeping as a business, particularly where those funds are being collected and remitted as a service to Pennsylvania,” Smith said.
Drechny told the committee that removing the fee from the sales tax portion of transaction is both technically feasible and should not be costly to retailers.
“This is not a matter of the technical ability to avoid imposing interchange fees on sales tax amounts that merchants must pay to the state,” Drechny said. “Instead, this is an issue of the desire of those who benefit from charging the merchants an additional amount to retain high profits.”
In correspondence to the committee, PFMA President and CEO Alex Baloga wrote, “exempting sales tax from the swipe fee will keep money in the state… 20 to 25 cents from every hundred dollars of taxable goods that would now remain with the retailer to spend on store improvements, employee compensation, and be more aggressive on pricing.”
For many merchants, swipe fees are now the highest operating cost after labor. In an environment of strong competition and narrow margins, this ever-rising cost ultimately must be built into pricing, driving up expenses for the average family by close to $1,000 a year, according to the Merchants Payments Coalition.
Erica Koup Logsdon, Director of Communications and Media Relations