Senate Study Bill 1229 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON DAWSON) A BILL FOR An Act excluding interchange fees imposed upon certain taxes at 1 points of sale. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 2103XC (1) 91 jm/jh
S.F. _____ Section 1. NEW SECTION . 423H.1 Definitions. 1 As used in this chapter, unless the context otherwise 2 requires: 3 1. Credit card means a card, plate, coupon book, or other 4 credit device existing for the purpose of obtaining money, 5 property, labor, or services on credit. 6 2. Debit card means a card, or other payment code or 7 device, issued or approved for use through a payment card 8 network to debit an asset account, regardless of the purpose 9 for which the account is established, whether authorization is 10 based on signature, personal identification number, or other 11 means. Debit card includes a general-use prepaid card, as 12 defined in 15 U.S.C. 1693l-1. Debit card does not include 13 paper checks. 14 3. Electronic payment transaction means a transaction 15 in which a person uses a debit card, credit card, or other 16 payment code or device, issued or approved through a payment 17 card network to debit a deposit account or use a line of 18 credit, whether authorization is based on a signature, personal 19 identification number, or other means. 20 4. Interchange fee means a fee established, charged, 21 or received by a payment card network for the purpose of 22 compensating the issuer for its involvement in an electronic 23 payment transaction. 24 5. Issuer means a person issuing a debit card or credit 25 card, or the agent of such a person. 26 6. Payment card network means an entity that meets all of 27 the following: 28 a. Directly, or through licensed members, processors, 29 or agents, provide proprietary services, infrastructure, and 30 software that routes information and data to conduct credit 31 card or debit card transaction authorization, clearance, or 32 settlement. 33 b. A seller uses, as a form of payment, a brand of credit 34 card or debit card, or other device that may be used to carry 35 -1- LSB 2103XC (1) 91 jm/jh 1/ 4
S.F. _____ out credit or debit transactions. 1 7. Sale includes leases or rentals. 2 8. Seller means any person making sales of items or 3 services subject to tax. 4 9. Settlement means the transfer of funds from the 5 account of a customer to a seller upon electronic submission of 6 finalized sales transactions to the payment card network. 7 10. Tax means sales and use taxes under chapter 423, 8 hotel and motel taxes under chapter 423A, local option taxes 9 under chapter 423B, automobile rental taxes under chapter 423C, 10 equipment taxes under chapter 423D, water service taxes under 11 chapter 423G, excise taxes on fuel under sections 452A.3 and 12 452A.41, and cigarette and tobacco taxes under chapter 453A. 13 Sec. 2. NEW SECTION . 423H.2 Exclusion of interchange fee 14 upon tax. 15 The amount of tax calculated as a percentage of an electronic 16 payment transaction amount and listed separately on the payment 17 invoice or other demand for payment shall be excluded from 18 the amount on which an interchange fee is charged for the 19 electronic payment transaction. 20 Sec. 3. NEW SECTION . 423H.3 Payment card network 21 requirements. 22 1. a. A payment card network shall deduct the amount of 23 any tax imposed from the calculation of an interchange fee 24 specific to each form or type of electronic payment transaction 25 at the time of settlement, or shall rebate the amount of an 26 interchange fee proportionate to the amount attributable to the 27 amount of tax. 28 b. A deduction or rebate must occur pursuant to this 29 subsection at the time of settlement when the seller is able to 30 capture and transmit the tax amount relevant to the sale at the 31 time of sale as part of the transaction finalization. 32 2. If a seller is unable to capture and transmit tax 33 or amounts relevant to the sale at the time of the sale, 34 the payment card network shall accept proof of tax amounts 35 -2- LSB 2103XC (1) 91 jm/jh 2/ 4
S.F. _____ collected on the sale subject to the interchange fee upon 1 submission of the sales data by the seller and promptly credit 2 the settlement account of the seller. 3 Sec. 4. NEW SECTION . 423H.4 Penalties. 4 1. A payment card network that violates this chapter is 5 subject to a civil penalty in the amount of one thousand 6 dollars per violation. Any moneys collected pursuant to this 7 subsection shall be deposited into the general fund of the 8 state. 9 2. In lieu of an action under subsection 1, a person may 10 bring a private action to enforce this chapter, subject to 11 the same penalties as provided under subsection 1, except any 12 penalty amounts collected from the payment card network are 13 recoverable by the person bringing the private action. 14 EXPLANATION 15 The inclusion of this explanation does not constitute agreement with 16 the explanations substance by the members of the general assembly. 17 Currently, a payment card network (credit or debit card) 18 charges an interchange fee upon the entire electronic payment 19 transaction amount, including the amount of any taxes charged. 20 This bill excludes the amount of tax listed on the electronic 21 payment transaction from the payment card networks interchange 22 fee assessed upon such a transaction. 23 The bill defines interchange fee to mean a fee 24 established, charged, or received by a payment card network for 25 the purpose of compensating the issuer for its involvement in 26 an electronic payment transaction. 27 The bill defines tax to mean sales and use taxes under Code 28 chapter 423, hotel and motel taxes under Code chapter 423A, 29 local option taxes under Code chapter 423B, automobile taxes 30 under Code chapter 423C, equipment taxes under Code chapter 31 423D, water service taxes under Code chapter 423G, excise taxes 32 on fuel under Code sections 452A.3 and 452A.41, and cigarette 33 and tobacco taxes under Code chapter 453A. 34 The bill requires the payment card network to deduct 35 -3- LSB 2103XC (1) 91 jm/jh 3/ 4
S.F. _____ the amount of any tax imposed from the calculation of an 1 interchange fee specific to each form or type of electronic 2 payment transaction at the time of settlement, or requires the 3 payment card network to rebate the amount of an interchange fee 4 proportionate to the amount attributable to the amount of tax. 5 If a seller is unable to capture and transmit tax or amounts 6 relevant to the sale at the time of the sale, the bill requires 7 the payment card network to promptly credit the settlement 8 account of the seller, upon sufficient proof. 9 A payment card network that violates the bill is subject to 10 a civil penalty in the amount of $1,000 per violation. Any 11 moneys collected for violations of the bill shall be deposited 12 into the general fund of the state. In lieu of the civil 13 penalty, a person may enforce the bill through a private 14 action, and any penalty amounts are recoverable by the person 15 bringing the private action. 16 -4- LSB 2103XC (1) 91 jm/jh 4/ 4