A new law in Illinois, effective July 2025, prohibits interchange assessments on sales taxes and gratuities, and legislation pending in at least four other states would impose similar prohibitions. Given the adjustments this will require of merchants and payment processors, we asked members of The Green Sheet Advisory Board the following questions:
Following is a portion of the answers we received.
Agents and ISOs in their sales roles supply entries on merchant processing applications that convey rates and fees. For most agents and ISOs these rates and fees are interchange plus—meaning they are additions to the interchange fees, dues and assessments that the card brands and their sponsor banks designate.
The agents and ISOs have no control over these interchange fees, dues and assessments. They are wholly reliant on the card brands to calculate and apply these rates and fees. If there are exceptions or variations for merchants in particular states, the card brands and their sponsor banks will have to calculate and apply the proper rates and fees. The agents and ISOs should not be liable for compliance.
I would propose that the states work together, as they have in the past with EBT in the 1990s and other initiatives, to coordinate their approaches. Then the states can propose unified national standards for applying exemptions for sales taxes and gratuities.
The patchwork created by state legislatures acting singly is not optimal and, to my way of thinking, not feasible.
With our footprint in the NY tri-state area, we are finding it more and more difficult to address the concerns of merchants with the various cash discount and dual pricing programs. In NY the confusion comes from the permitted credit surcharge program.
As an example, yesterday we received notice of a complaint from Visa on a Pizza location that is set up for dual pricing. The setup is correct in that the business enters the standard price, and if someone pays in cash, they receive a discount. Visa claims you are not permitted to add a surcharge on debit cards. They also claimed that the business never registered with them.
Since this is not a credit surcharge program but a dual processing cash discount program, Visa was incorrect in making this claim. Obviously, the business owner was upset and worried. We submitted pictures of the signage approved by our processor. We had to submit a copy of a cash transaction showing the discount and a card transaction where there is no mention of any surcharge.
So yes, there is absolute confusion in the marketplace. There are also varying signs to post based on the processor. That definitely needs to change to (1) permitted positing of notification.
As an ISO who does not control the transactions, or have any input into the platform the transactions are run on, we are at the mercy of the processor to make internal changes based on state requirements. I would think that this would add complexity to their systems which would lead to higher overall costs and human mistakes, and not accomplish any savings for businesses in that state.
Yes, I certainly understand the need to protect both the merchant and the consumer, but this should come, in my opinion, from the card brand level. I think it would be virtually impossible for a Fiserv, TSYS, Worldpay, Elavon or any other platform to deal with the complexity of each state setting up its own rules. Diversity in rules, by states, certainly would add to the costs to processors which would have to be passed on to the merchant.
Long term, if such an event happened and each state's legislature set up different rules for the processors to follow, I do believe the processors would have the right to increase costs to the merchants, which the states are simply trying to reduce.
Personally, I think a wiser decision should be the reduction and simplification of interchange. Yes, banks who are issuers are saddled with losses, but to what extent? If Chase or Wells Fargo or any large issuer was losing money on this aspect of their business would they really continue? I know the card issuing banks are very powerful and this reduction in interchange is just a pipe dream, but it would help solve the cost issue to businesses.
They do not want sales tax, tips, and other taxes charged interchange fees. When a customer comes into a restaurant, the bill is $100, the sales tax is 5 percent, $105, they add a tip of $20, and the total is $125. That is all the processor sees. They do not see the tip or the sales tax, and they do not know if the person ate by themself or with two other people, and they do not know what they ate or drank.
It's the same thing; they want a special SIC code to track guns—someone walks into a sporting goods store and buys a shirt, ammo or a hat. The credit card company needs to find out what the person bought.
It's all for votes.
These are just a few suggestions that would help Small to medium-sized businesses.
We will publish insights from additional Advisory Board members in a subsequent issue of The Green Sheet.
Thank you to the valued payments experts who took the time to weigh in on this issue. 
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