(The Center Square) – State lawmakers in Washington and Maryland are following the lead of Illinois in proposing legislation to ban credit card swipe fees on sales taxes that cost retailers significant money.
Maryland’s House Bill 29, introduced in January, would prohibit credit card networks from charging “swipe fees” on sales tax, which cost merchants in Maryland $156.9 million in 2023 alone.
In Washington state, Senate Bill 5070 would also prohibit swipe fees from being charged on sales tax, which cost Washington’s businesses $384 million in fees on sales tax in 2023. It additionally would prohibit employers from deducting the cost of credit card processing fees, up to 4% of their earnings, from their employees’ tips.
In Illinois, the Interchange Fee Prohibition Act was enacted in 2024. It prohibits banks from charging interchange – or swipe – fees on sales tax and tip revenues. Banking and credit union groups sued to block it, and it remains in the courts.
U.S. merchants pay the highest credit card transaction costs in the world, totaling $224 billion in 2023 alone, with $143 billion of this being attributed solely to swipe fees, according to data from CMS Payments Intelligence, which bills itself as the world’s leading payments consultancy
Maryland’s House Bill 29 was introduced by Delegates Brian Crosby, a Democrat, and Todd Morgan, a Republican. It has the support of The Merchants Payments Coalition (MPC).
“The credit card industry price-fixing swipe fees is bad enough, but taking a slice out of tax dollars before retailers can hand them over to the state of Maryland is unconscionable,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said in a statement. “Retailers have to make up the difference, and that ultimately drives up prices for consumers. It is time for this abuse to end. Marylanders’ tax dollars should not be siphoned off to Wall Street this way and we appreciate legislators looking to solve this unjust problem.”
In Washington state, in addition to banning swipe fees on sales tax, Senate Bill 5070 also would ban such fees on tips.
The Washington Food Industry Association’s Katie Beeson testified during a hearing on the bill that “Interchange fees make up roughly 0.8 to 1.2% of our total operating costs for the majority of our stores and that amount is nearly equal to our bottom line. These fees have gone up nearly 50% from Visa/Mastercard since the pandemic and our bottom line continues to shrink,” NBC Right Now reported.
In April 2022, Visa and Mastercard increased swipe fees by $1.2 billion despite calls from a bipartisan group of U.S. senators not to do so, as The Center Square previously reported. The senators argued that the increase would worsen already severe inflationary pressures, as swipe fees increase with inflation.
There’s also a bipartisan piece of legislation in Congress that would create more competition in the credit card industry and bring such fees down, supporters argue.
The Credit Card Competition Act “would require the largest credit-card issuing financial institutions in the country – those with assets over $100 billion – to enable at least two credit card networks to be used on their credit cards instead of just one, and at least one of those networks must be a network other than the Visa/Mastercard duopoly,” a summary of the act from U.S. Sen. Dick Durbin, D-Illinois, says. “In other words, after a transition period during which the Federal Reserve would write implementing regulations, the giant banks that issue the overwhelming majority of Visa and Mastercard credit cards would have to choose a second competitive network to go on each card, and then a merchant would get to choose which of those networks to use to process a transaction.”
