Sales Tax Treatment of Credit Card "Swipe" Fees

Beginning January 27, 2013, a retailer may charge a "swipe" fee to a customer using certain credit cards for payment.

If the product or service being sold is taxable and the retailer chooses to charge a "swipe" fee, sales or use tax applies to the total amount charged by the retailer for the product or service, which includes the amount being charged for the "swipe" fee.

Example: Individual purchases a new television for $599 at Retailer's store. Individual pays using a credit card. Retailer charges Individual a 2% "swipe" fee on the $599 selling price. Retailer's taxable receipts from the sale of the television are computed as follows:

Selling Price of television
"Swipe" fee charged by Retailer ($599 X .02)
Taxable Receipts
$599.00
11.98
$610.98

If the credit card is being used to pay for both taxable and nontaxable products or services, the retailer may allocate the "swipe" fee between the taxable and nontaxable purchases. In this case, the sales tax applies to the total amount charged for the taxable products or services, which includes the "swipe" fee charged on the taxable products or services.

Example: Individual goes to Grocery Store and purchases exempt food items in the amount of $65 and taxable items in the amount of $28. Individual pays using a credit card. Grocery Store charges Individual a 2% "swipe" fee on the $93 total selling price. Grocery Store's taxable receipts are determined as follows:

Selling Price of taxable items
"Swipe" fee on taxable items ($28 X .02)
Taxable Receipts
$28.00
.56
$28.56

Page last updated April 15, 2013