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Iowa retailers call for law preventing processing fee on state tax

Randy Feenstra

Iowa retailers are urging legislators to pass a law that prevents credit and debit card processors from tacking on a processing fee to the portion of the transaction that includes state tax.

“We’re paying $41 million-plus a year in fees to collect and remit taxes,” Henter said, according to Radio Iowa. “We don’t think that’s fair.”

The state of Iowa has a six percent state tax rate. If one were to purchase a $100 pair of shoes, the transaction total would amount to $106. Then, to process a debit or credit transaction, retailers are required to pay a small percentage of what the transaction is worth. Iowa Retail Federation President Jim Henter asked a panel of legislators on Thursday to help, Radio Iowa reports.

Debit and credit card processors oppose the bill.

Mike Hollinger of the Shazam Network, an electronic card processor, argued that consumers purchasing goods subject to the Iowa state tax would be required to swipe their card twice for the entire transaction – once for the actual purchase and another for the state sales tax.

“We do not believe that it’s a simple, you know, couple of programming changes,” Hollinger said, according to Radio Iowa. “This is a massive change.”

Senator Randy Feenstra (R-Iowa) said that the proposed legislation would be difficult to enforce.

“I don’t think it’s a government issue. I think it’s a contractual issue,” Feenstra said, according to Radio Iowa. “Your contract should say we’ll pay on the cost of the goods only and not on the tax, and, to me, that’s your argument between you and the processor.”

Retailers say that they have been unable to negotiate that deal, so they have asked legislators to fight on their behalf. Though several groups of legislators in both chambers of Congress are reviewing the proposed law, it is unlikely to become law this year.

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