ATLANTA, February 10, 2023 – The Georgia Alliance for Inflation Reduction welcomed legislation introduced this week by state Senator Billy Hickman, R-Statesboro, that would bar credit card networks from charging millions of dollars in “swipe” fees on sales and excise taxes in an effort to ease inflation for Georgians.
“Charging swipe fees on top of taxes is simply a tax on a tax,” Georgia Retailers Vice President of Government Affairs Ben Cowart said. “Georgians are working hard in the face of near-record inflation. We need to do all we can to protect them against needless fees and charges.”
“The time has come to give Georgians a break and stop the California and New York-based card industry from unfairly taking hundreds of millions of hard-earned dollars out of our state’s economy,” Hickman said. “This legislation would create an economic stimulus at no cost to the state that would help merchants hold down future price increases, create jobs and invest in their communities, all for the benefit of Georgians who have been hit the hardest by the pandemic and inflation. It would also restore fairness to the state’s tax system by removing an unfair cost borne by merchants – and ultimately their customers – when they perform their state-mandated duty to collect these taxes.”
In a move to bring swipe fees on taxes under control, Hickman introduced the Consumer Inflation Reduction and Tax Fairness Act in the General Assembly.
The legislation would prohibit card networks – including Visa, Mastercard, American Express and Discover – from charging payment card swipe fees on any amount other than the base purchase price of goods and services, thereby barring swipe fees on sales, alcohol, tobacco and state motor fuel taxes. Violators would pay a civil penalty of at least $1,000 per incident to the retailer, not the state, and be required to refund any swipe fee collected on taxes.
Unknown to most consumers, merchants are charged a “swipe” fee averaging over 2% of the transaction – including the sales tax – every time a customer pays by credit card. Based on a $100 purchase, that would amount to about $2.25 if the fee only applied to the merchandise. But the fee also applies to the $7 sales tax, costing the merchant another 15 cents for a total of about $2.40. The fees are also applied to other state-mandated taxes, adding to the cost of each alcoholic drink, pack of cigarettes or gallon of gasoline purchased in Georgia.
According to the Federal Reserve, about a third of U.S. purchases are paid for by credit card. Based on state tax revenues, that means Georgia merchants and their customers pay an estimated $123.8 million in swipe fees on sales tax and another $16.6 million on excise taxes on average each year. Altogether, swipe fees collected on taxes amount to about $140 million a year, or about $36 a year for the average Georgia family.
The legislation was welcomed by Anthony Waters, owner of LA Waters Furniture in Statesboro.
“Swipe fees on everyday purchases drive up costs each year for the average Georgia business and charging these fees on the tax portion of a receipt costs us even more,” Waters said. “With supply chain disruptions, workforce shortages and rising inflation, ending swipe fees on the taxes would remove one of the endless pressures that small businesses are facing.”
Credit and debit card swipe fees add up quickly and have more than doubled over the past decade, soaring 25% in 2021 alone to a record $137.8 billion nationwide, according to the Nilson Report. The fees are most merchants’ highest operating cost after labor and 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.
The Georgia legislation is part of a national move to bring swipe fees under control in a time of rampant inflation. Legislation pending in Congress would bring competition to how transactions are routed for processing and is expected to save merchants and their customers an estimated $11 billion a year.
About the Georgia Alliance for Inflation Reduction
The Georgia Alliance for Inflation Reduction represents retailers, small businesses, supermarkets, independent grocers, convenience stores, and other Georgia merchants who accept credit and debit cards. Members include the Georgia Retailers, Georgia Association of Convenience Stores, Georgia Food Industry Association, Georgia Restaurant Association, Georgia Hotel & Lodging Association, Georgia Agribusiness Council, and the National Federation of Independent Business.
Contact: Ben Cowart ben@georgiaretail.org