Senate committee fails to advance interchange‑fee bill after hours of testimony on costs and technical limits

Senate Bill 1055, proposed to prohibit interchange ("swipe") fees on sales tax and gratuity portions of electronic transactions, was considered in the Senate Commerce and Human Resources Committee but failed to move forward for lack of a motion.

Senator Mark Harris, sponsor of the bill, told the committee the measure would require interchange fees to be calculated on the purchase amount before sales tax and tips are added. Harris said the change would leave “over $36.5 million” in Idaho businesses rather than being paid to out‑of‑state processors, describing the current practice as an ‘‘unfair fee’’ because retailers collect and remit sales tax on behalf of government.

Multiple industry and trade witnesses offered contrasting testimony. Melinda Merrill of E. Gear & Merrill Public Policy said the Northwest Grocery Retail Association supports the bill and that many small retailers cannot absorb or pass on additional costs, noting grocery profit margins on some items are about 1 percent while interchange rates run 2–4 percent. Pam Eaton, president and CEO of the Idaho Retailers Association and Idaho Lodging and Restaurant Association, also supported the bill and said most point‑of‑sale (POS) systems already capture separate sales tax and tip figures (so‑called Level 2 data) and that merchants could opt out of the rebate process if they preferred.

Opponents said the change would be technically difficult, potentially raise compliance costs for small merchants, and could run afoul of federal law. Steve Rauschenberger of the Electronic Payment Coalition described the global payment system as segregated from retail POS systems and said banks and processors see only a single transaction amount; he cautioned a state‑level change would require costly hardware and software changes and could expose consumer data. Stacey Satterly of the Idaho Bankers Association raised privacy and security concerns, saying a rule requiring more detailed payment reporting could let processors know detailed purchase data that currently is not transmitted. Zach Forster, representing Idaho credit unions, said state-only changes could prompt processors to stop accepting transactions from Idaho‑chartered institutions if federally chartered institutions were exempt.

Committee members asked about litigation in Illinois and federal preemption. Witnesses said Illinois enacted a similar law; courts there have issued injunctions and ruled that national banks may be preempted from complying, and litigation continues. Witnesses also discussed the Durbin Amendment and other federal law that affects interchange regulation. Several senators expressed sympathy for small retailers’ concern about paying fees on money they do not keep but also cited legal and practical obstacles to a single‑state solution.

After extended discussion and no motion to advance the bill, the committee chair declared Senate Bill 1055 failed for lack of a motion.