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