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Cut the Government Sales Tax, Not the Private Company Fees

Florida should reduce its sales tax instead of focusing on complex modifications to the credit card processing system, writes Mattias Gugel and Jess Ward of the National Taxpayers’ Union.

Sometimes you just have to shake your head at the crazy ideas that come out of government.

Recently, there's been talk in Tallahassee about repealing a "hidden tax" that hits small business owners when their customers use a credit card.

This idea has gained traction with some state policymakers. The authors and supporters pushing Senate Bill 564 have said that the fees credit card companies charge from the sales tax portion of a transaction, as the price of the work they do to assist with a purchase, is unreasonable. So, they want to eliminate it.  

The desire to make purchases more affordable is admirable, especially as the state continues to recover from the pandemic and reel from the effects of inflation.

But the actual policy politicians and lobbyists are pushing would interfere in the free market and ban credit card companies from charging fees on the sales tax portion of a transaction. This kind of policy is, in effect, the government setting price controls.

Only in government does this make any sense. The proponents of this bill are attempting to blame the private sector companies for a “tax.”

But who taxes? Government, not private companies.

If the Florida Legislature is serious about helping small business owners and consumers and addressing the tax burden, they should consider another option. What would significantly impact the state economy and help families afford groceries, gas, and rent or their mortgages would be to seek relief via the current sales tax.

Furthermore, it's essential to look at the unintended consequences of what it means to ban fees imposed on only the sales tax portion of a credit card transaction.

Florida's sales tax affects multiple parties in a transaction, and electronic payment systems have been developed to accommodate consumers and businesses effectively. Currently, that system accounts for a transaction's final total cost. It does not parse out local or state sales tax.

Currently, no technological solution is available to provide the detail that payment networks and issuers need to identify and sort out tax payments for consumer transactions, approve them through payment systems, and calculate fee changes from existing data. Enacting this bill would force credit card companies to create an entirely new system, nearly double the amount of work they do each time a card is swiped, and increase processing costs, all of which will ultimately reach and harm taxpayers.

Florida has historically prioritized achieving real tax relief for taxpayers and small businesses. At the National Taxpayers Union, the nation's oldest taxpayer advocacy group, we applaud the Legislature and governor's leadership in protecting taxpayers and growing the state's economy.

However, we'd encourage the state to consider providing relief to taxpayers by thoroughly considering reducing the state's current 6 percent sales tax. Elected officials shouldn't mandate a pricey and complicated reorganization of how every credit card transaction is managed throughout the state only to have the unintended consequences undo any goals of affordability they're trying to achieve.

Don't fight the fees on the sales tax. Cut the sales tax itself.

Mattias Gugel is the director of state external affairs for National Taxpayers Union. Jessica Ward is the senior director of state affairs for National Taxpayers Union.