(The Center Square) – If Gov. J.B. Pritzker signs the budget and revenue package legislators approved, consumers paying by card may have to swipe to pay for their goods and swipe again to pay the sales tax for those goods.
Part of the deal with the Illinois Retail Merchants Association in exchange for a cap on the credit retailers get for collecting and remitting sales taxes is a change to the so-called interchange fee, limiting the fees financial institutions can charge on the sales tax of transactions.
During a Senate committee before the measure passed last month, Ashly Sharp with the Illinois Credit Union League said the change is flawed and impossible to implement.
“What this could mean for consumers is two swipes for a single transaction, one of the purchase of the goods or services subject to interchange and one for the tax or gratuity not subject to interchange,” Smith said.
Smith said enactment will require a “massive overhaul” of payment processing in order to comply. She also said the penalties for noncompliance are steep and could be ripe for miscalculations and potential fraud.
“Why would card networks continue to process transactions in which they’re prohibited from charging fees,” Smith asked. “Card processing has evolved into a quick and painless process but in no situation is it ever completely free.”
Pritzker’s Budget Director Alexis Sturm said they’ll work through concerns.
“That is a request from the retail merchants and so we will be working through the legislation that passed,” Sturm said last week.
IRMA said they are “pleased the Governor’s office and legislators agreed to limit the fees financial institutions can charge on the sales tax portion of transactions.”
“This important change will give retailers across Illinois some much-needed breathing room and we thank the Governor and legislators for their constructive engagement on this issue,” IRMA said in a statement.
Pritzker said the change was the best outcome for the state’s retailers, who will also be capped in the discount they get for collecting and remitting sales taxes.
“In order to make sure that we were right-sizing what retailers get in a payment from the state in a world where most of it is pushing a button on a computer to get a result,” Pritzker said.
Pritkzer said there is nothing “hyper unusual” about it.
Retailers have argued it takes much more than “a button on a computer to get a result.” IRMA President Rob Karr told a recent House committee it takes manpower, infrastructure and other costs for businesses to calculate, collect and remit sales taxes to state and local governments. Retailers also have to work to stay above any potential audits from the Illinois Department of Revenue.
The revenue package has yet to be sent to the governor for his approval.
