Senate committee debates bill to bar interchange fees on state and local sales taxes
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Summary
Senator Echols’ SB 512 would prohibit merchants from being charged interchange (swipe) fees on the tax portion of transactions. Retailers backed the measure as fairness and cost relief; banks, credit unions and processors warned of fraud risk, technical complexity and market interference. The committee took testimony but did not vote.
Senator Echols presented SB 512 to a Senate committee, saying the bill would prohibit interchange (commonly called swipe) fees from being assessed on state and local sales and excise taxes that merchants are required to collect and remit.
“What's in what world is a tax on a tax?” Echols asked, framing the bill as restoring fairness to merchants who collect taxes but are charged interchange on tax amounts. The bill would let card networks exclude taxes from interchange calculations or require quarterly refunds proportionate to tax amounts; violations would carry a civil penalty equal to the swipe fees on taxes paid plus 10%.
Retail and merchant witnesses supported the proposal. Stephen Lofton, representing Georgia retailers, told the committee that interchange fees on sales-tax amounts totaled about $325,000,000 in 2024 while vendor compensation to merchants was about $103,000,000, framing a $220,000,000 shortfall for businesses operating on thin margins.
Payment-industry and banking witnesses urged caution. Joel Wiggins of the Electronic Transactions Association warned of geographic and technical complexity and said the industry wanted continued discussions. Lori Godfrey of the Community Bankers Association of Georgia said interchange is a fee for guaranteed service, fraud protection and immediate funding; she warned that removing interchange on taxes could increase costs, operational risks and fraud exposure for community banks.
Tripp Coefield of the Georgia Bankers Association and Sydney Searle of the Georgia Credit Union Association echoed concerns about fraud, operational burden and precedent. Kevin Carroll (industry witness) said technical solutions exist to separate tax into a dedicated field for all cards and that some systems already collect tax fields for certain commercial cards. Carroll also noted experience at networks and processors suggesting the feature is technically possible.
The committee heard competing claims about who ultimately bears costs. Sponsor and retailer witnesses said the bill would stop card networks and issuing banks from profiting from amounts that belong to the state; bank and credit-union witnesses said interchange funds services that merchants and consumers rely on, including fraud mitigation. The committee ended the hearing without a vote and said it would continue reviewing the issue.