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North Carolina House Bill H650

North Carolina 2025-2026 Regular Session

North Carolina House Bill H650 Compare Versions

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11 GENERAL ASSEMBLY OF NORTH CAROLINA
22 SESSION 2025
3-H 1
4-HOUSE BILL 650
3+H D
4+HOUSE BILL DRH10271-MU-32
5+
56
67
78 Short Title: No Interchange Fees on Sales Tax or Tips. (Public)
8-Sponsors: Representatives Howard, Setzer, and N. Jackson (Primary Sponsors).
9-For a complete list of sponsors, refer to the North Carolina General Assembly web site.
10-Referred to: Finance, if favorable, Rules, Calendar, and Operations of the House
11-April 2, 2025
12-*H650 -v-1*
9+Sponsors: Representative Howard.
10+Referred to:
11+
12+*DRH10271 -MU-32*
1313 A BILL TO BE ENTITLED 1
1414 AN ACT TO PROHIBIT INTERCHANGE FEES ON SALES TAX OR GRATUITIES. 2
1515 The General Assembly of North Carolina enacts: 3
1616 SECTION 1. Chapter 66 of the General Statutes is amended by adding a new Article 4
1717 to read: 5
1818 "Article 52. 6
1919 "No Interchange Fees on Sales Tax or Gratuities. 7
2020 "§ 66-511. Definitions. 8
2121 In this Article, the following definitions apply: 9
2222 (1) Acquirer bank. – A member of a payment card network that contracts with a 10
2323 merchant for the settlement of electronic payment transactions, whether 11
2424 directly with merchants or indirectly through a processor. 12
2525 (2) Authorization. – The process through which a merchant requests approval for 13
2626 an electronic payment transaction from the issuer. 14
2727 (3) Clearance. – The process of transmitting final transaction data from a 15
2828 merchant to an issuer for posting to the cardholder's account and the 16
2929 calculation of fees and charges, including interchange fees, that apply to the 17
3030 issuer and the merchant. 18
3131 (4) Covered credit card issuer. – A credit card issuer that, together with any 19
3232 affiliates, had consolidated worldwide banking and nonbanking assets, 20
3333 including assets of affiliates, other than trust assets under management, of 21
3434 more than eighty-five billion dollars ($85,000,000,000) at any point during 22
3535 the previous calendar year. 23
3636 (5) Credit card. – A card, plate, coupon book, or other credit device existing for 24
3737 the purpose of obtaining money, property, labor, or services on credit. 25
3838 (6) Debit card. – A card or other payment code or device issued or approved for 26
3939 use through a payment card network to debit an asset account, regardless of 27
4040 the purpose for which the account is established, whether authorization is 28
4141 based on a signature, a personal identification number, or other means. The 29
4242 term includes a general-use prepaid card, as defined in 15 U.S.C. § 1693l-1. 30
4343 The term does not include paper checks. 31
4444 (7) Electronic payment transaction. – A transaction in which a person uses a debit 32
4545 card, a credit card, or other payment code or device issued or approved 33
46-through a payment card network to debit a deposit account or use a line of 34 General Assembly Of North Carolina Session 2025
47-Page 2 House Bill 650-First Edition
48-credit, whether authorization is based on a signature, a personal identification 1
49-number, or other means. 2
50-(8) Gratuity. – A voluntary monetary contribution to an employee from a guest, 3
51-patron, or customer in connection with services rendered. 4
52-(9) Interchange fee. – A fee established, charged, or received by a payment card 5
53-network for the purpose of compensating the issuer for its involvement in an 6
54-electronic payment transaction. 7
55-(10) Issuer. – A person issuing a debit card or credit card. 8
56-(11) Merchant. – A person that accepts electronic payment transactions and 9
57-collects and remits a tax. 10
58-(12) Payment card network. – An entity to which both of the following apply: 11
59-a. The entity, directly or through licensed members, processors, or 12
60-agents, provides the proprietary services, infrastructure, and software 13
61-to route information and data for the purpose of conducting electronic 14
62-payment transaction authorization, clearance, and settlement. 15
63-b. A merchant uses the entity to accept as a form of payment a brand of 16
64-debit card, credit card, or other device that may be used to carry out 17
65-electronic payment transactions. 18
66-(13) Person. – Any individual, firm, public or private corporation, government, 19
67-partnership, association, or any other organization or entity. 20
68-(14) Processor. – An entity that facilitates, services, processes, or manages the 21
69-debit or credit authorization, billing, transfer, payment procedures, or 22
70-settlement with respect to any electronic payment transaction. 23
71-(15) Settlement. – The process of transmitting sales information to the issuing bank 24
72-for collection and reimbursement of funds to the merchant and calculating and 25
73-reporting the net transaction amount to the issuer and merchant for an 26
74-electronic payment transaction that is cleared. 27
75-(16) Tax. – Any use and occupation tax or excise tax imposed by the State or a unit 28
76-of local government in the State. 29
77-(17) Tax documentation. – Documentation, such as invoices, receipts, journals, 30
78-ledgers, and tax returns filed with the Department of Revenue or local taxing 31
79-authorities, that is sufficient for a payment card network to determine the total 32
80-amount of an electronic payment transaction and the tax or gratuity amount of 33
81-the transaction. Tax documentation may be related to a single electronic 34
82-payment transaction or multiple electronic payment transactions aggregated 35
83-over a period of time. 36
84-"§ 66-512. Interchange fees on taxes and gratuities prohibited. 37
85-(a) An issuer, a payment card network, an acquirer bank, or a processor shall not receive 38
86-or charge a merchant an interchange fee on the tax amount or gratuity of an electronic payment 39
87-transaction if the merchant informs the acquirer bank or its designee of the tax or gratuity amount 40
88-as part of the authorization or settlement process for the electronic payment transaction. The 41
89-merchant shall transmit the tax or gratuity amount data as part of the authorization or settlement 42
90-process to avoid being charged an interchange fee on the tax or gratuity amount of an electronic 43
91-payment transaction. 44
92-(b) A merchant that does not transmit the tax or gratuity amount data in accordance with 45
93-subsection (a) of this section may submit tax documentation for the electronic payment 46
94-transaction to the acquirer bank or its designee no later than 180 days after the date of the 47
95-electronic payment transaction and, within 30 days after the merchant submits the necessary tax 48
96-documentation, the issuer shall credit to the merchant the amount of the interchange fee charged 49
97-on the tax or gratuity amount of the electronic payment transaction. 50 General Assembly Of North Carolina Session 2025
98-House Bill 650-First Edition Page 3
99-(c) This section does not create liability for a payment card network regarding the 1
100-accuracy of the tax or gratuity data reported by the merchant. 2
101-(d) It is unlawful for an issuer, a payment card network, an acquirer bank, or a processor 3
102-to alter or manipulate the computation and imposition of interchange fees by increasing the rate 4
103-or amount of the fees applicable to or imposed upon the portion of a credit or debit card 5
104-transaction not attributable to taxes or gratuities to circumvent the effect of this section. 6
105-"§ 66-513. Penalties. 7
106-(a) Injunctive Relief. – The Attorney General may file suit to seek injunctive relief from 8
107-a covered credit card issuer or payment card network that has violated any of the prohibitions of 9
108-this Article. 10
109-(b) Civil Penalty. – The Attorney General may file suit to assess a civil penalty on an 11
110-issuer, payment card network, acquirer bank, or processor that has violated this Article. The 12
111-amount of the civil penalty shall be one thousand dollars ($1,000) per electronic payment 13
112-transaction conducted in violation of this Article. The clear proceeds of civil penalties provided 14
113-for in this section shall be remitted to the Civil Penalty and Forfeiture Fund in accordance with 15
114-G.S. 115C-457.2. 16
115-(c) Refund. – If a court finds that a person has violated this Article, the person shall refund 17
116-the merchant the interchange fee calculated on the tax or gratuity amount of the electronic 18
117-payment transaction. 19
118-(d) Data Use. – An entity, other than the merchant, involved in facilitating or processing 20
119-an electronic payment transaction, including an issuer, payment card network, acquirer bank, or 21
120-processor, shall not distribute, exchange, transfer, disseminate, or use the electronic payment 22
121-transaction data except to facilitate or process the electronic payment transaction; to monitor for, 23
122-detect, or prevent fraud; to support loyalty, rewards, or promotional offerings; to tailor products 24
123-and services to serve customer needs; or as required by law. A violation of this subsection 25
124-constitutes a violation of G.S. 75-1.1." 26
125-SECTION 2. If a provision of this act or its application to a person or circumstance 27
126-is held invalid, the invalidity does not affect another provision or application that can be given 28
127-effect without the invalid provision. 29
128-SECTION 3. This act becomes effective October 1, 2025, and applies to transactions 30
129-made on or after that date. 31
46+through a payment card network to debit a deposit account or use a line of 34
47+credit, whether authorization is based on a signature, a personal identification 35
48+number, or other means. 36
49+H.B. 650
50+Apr 1, 2025
51+HOUSE PRINCIPAL CLERK General Assembly Of North Carolina Session 2025
52+Page 2 DRH10271-MU-32
53+(8) Gratuity. – A voluntary monetary contribution to an employee from a guest, 1
54+patron, or customer in connection with services rendered. 2
55+(9) Interchange fee. – A fee established, charged, or received by a payment card 3
56+network for the purpose of compensating the issuer for its involvement in an 4
57+electronic payment transaction. 5
58+(10) Issuer. – A person issuing a debit card or credit card. 6
59+(11) Merchant. – A person that accepts electronic payment transactions and 7
60+collects and remits a tax. 8
61+(12) Payment card network. – An entity to which both of the following apply: 9
62+a. The entity, directly or through licensed members, processors, or 10
63+agents, provides the proprietary services, infrastructure, and software 11
64+to route information and data for the purpose of conducting electronic 12
65+payment transaction authorization, clearance, and settlement. 13
66+b. A merchant uses the entity to accept as a form of payment a brand of 14
67+debit card, credit card, or other device that may be used to carry out 15
68+electronic payment transactions. 16
69+(13) Person. – Any individual, firm, public or private corporation, government, 17
70+partnership, association, or any other organization or entity. 18
71+(14) Processor. – An entity that facilitates, services, processes, or manages the 19
72+debit or credit authorization, billing, transfer, payment procedures, or 20
73+settlement with respect to any electronic payment transaction. 21
74+(15) Settlement. – The process of transmitting sales information to the issuing bank 22
75+for collection and reimbursement of funds to the merchant and calculating and 23
76+reporting the net transaction amount to the issuer and merchant for an 24
77+electronic payment transaction that is cleared. 25
78+(16) Tax. – Any use and occupation tax or excise tax imposed by the State or a unit 26
79+of local government in the State. 27
80+(17) Tax documentation. – Documentation, such as invoices, receipts, journals, 28
81+ledgers, and tax returns filed with the Department of Revenue or local taxing 29
82+authorities, that is sufficient for a payment card network to determine the total 30
83+amount of an electronic payment transaction and the tax or gratuity amount of 31
84+the transaction. Tax documentation may be related to a single electronic 32
85+payment transaction or multiple electronic payment transactions aggregated 33
86+over a period of time. 34
87+"§ 66-512. Interchange fees on taxes and gratuities prohibited. 35
88+(a) An issuer, a payment card network, an acquirer bank, or a processor shall not receive 36
89+or charge a merchant an interchange fee on the tax amount or gratuity of an electronic payment 37
90+transaction if the merchant informs the acquirer bank or its designee of the tax or gratuity amount 38
91+as part of the authorization or settlement process for the electronic payment transaction. The 39
92+merchant shall transmit the tax or gratuity amount data as part of the authorization or settlement 40
93+process to avoid being charged an interchange fee on the tax or gratuity amount of an electronic 41
94+payment transaction. 42
95+(b) A merchant that does not transmit the tax or gratuity amount data in accordance with 43
96+subsection (a) of this section may submit tax documentation for the electronic payment 44
97+transaction to the acquirer bank or its designee no later than 180 days after the date of the 45
98+electronic payment transaction and, within 30 days after the merchant submits the necessary tax 46
99+documentation, the issuer shall credit to the merchant the amount of the interchange fee charged 47
100+on the tax or gratuity amount of the electronic payment transaction. 48
101+(c) This section does not create liability for a payment card network regarding the 49
102+accuracy of the tax or gratuity data reported by the merchant. 50 General Assembly Of North Carolina Session 2025
103+DRH10271-MU-32 Page 3
104+(d) It is unlawful for an issuer, a payment card network, an acquirer bank, or a processor 1
105+to alter or manipulate the computation and imposition of interchange fees by increasing the rate 2
106+or amount of the fees applicable to or imposed upon the portion of a credit or debit card 3
107+transaction not attributable to taxes or gratuities to circumvent the effect of this section. 4
108+"§ 66-513. Penalties. 5
109+(a) Injunctive Relief. – The Attorney General may file suit to seek injunctive relief from 6
110+a covered credit card issuer or payment card network that has violated any of the prohibitions of 7
111+this Article. 8
112+(b) Civil Penalty. – The Attorney General may file suit to assess a civil penalty on an 9
113+issuer, payment card network, acquirer bank, or processor that has violated this Article. The 10
114+amount of the civil penalty shall be one thousand dollars ($1,000) per electronic payment 11
115+transaction conducted in violation of this Article. The clear proceeds of civil penalties provided 12
116+for in this section shall be remitted to the Civil Penalty and Forfeiture Fund in accordance with 13
117+G.S. 115C-457.2. 14
118+(c) Refund. – If a court finds that a person has violated this Article, the person shall refund 15
119+the merchant the interchange fee calculated on the tax or gratuity amount of the electronic 16
120+payment transaction. 17
121+(d) Data Use. – An entity, other than the merchant, involved in facilitating or processing 18
122+an electronic payment transaction, including an issuer, payment card network, acquirer bank, or 19
123+processor, shall not distribute, exchange, transfer, disseminate, or use the electronic payment 20
124+transaction data except to facilitate or process the electronic payment transaction; to monitor for, 21
125+detect, or prevent fraud; to support loyalty, rewards, or promotional offerings; to tailor products 22
126+and services to serve customer needs; or as required by law. A violation of this subsection 23
127+constitutes a violation of G.S. 75-1.1." 24
128+SECTION 2. If a provision of this act or its application to a person or circumstance 25
129+is held invalid, the invalidity does not affect another provision or application that can be given 26
130+effect without the invalid provision. 27
131+SECTION 3. This act becomes effective October 1, 2025, and applies to transactions 28
132+made on or after that date. 29