BILL ANALYSIS Senate Research Center S.B. 2026 By: Campbell Business & Commerce 4/1/2025 As Filed AUTHOR'S / SPONSOR'S STATEMENT OF INTENT Merchants such as restaurants, hotels, retail stores, and many other small businesses pay banks and payment card companies like Visa and Mastercard an interchange fee and a network or assessment fee when customers pay for a transaction using a credit or debit card. Commonly referred to as "swipe fees," these fees typically range from three percent to five percent for credit card transactions. Since swipe fees are calculated as a percentage of the entire transaction that the merchant is required by law to collect, they are paying card processors a significant fee to be the government's tax collector. These swipe fees have become incredibly expensive for merchants, particularly in today's inflationary market. In 2023, local businesses paid over $1 billion in these fees to Wall Street just to collect Texas' sales tax. Because they are not set in a competitive, transparent market, U.S. credit card swipe fees are the highest in the industrialized world. On average, Americans pay about six times the rate that they pay in Europe. S.B. 2026 protects merchants from swipe fees only when they are collecting (1) state and local taxes as required by the government and (2) tips for their employees. Specifically, the bill requires card networks to either: Deduct taxes and tips from the swipe fee calculation when a transaction occurs; or Rebate the swipe fees that are attributable to taxes and tips once a merchant provides proof of these amounts within 180 days of the transaction. Creating both options ensures card networks have multiple methods to comply, eliminating any potential technology barriers. As proposed, S.B. 2026 amends current law relating to the charging of swipe fees on certain electronic payment transaction and authorizes a civil penalty. RULEMAKING AUTHORITY This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency. SECTION BY SECTION ANALYSIS SECTION 1. Amends Title 12, Business & Commerce Code, by adding Chapter 610 to read as follows: CHAPTER 610. CHARGING OF SWIPE FEES Sec. 610.001. DEFINITIONS. Defines "assessment fee," "electronic payment transaction," "gratuity," "interchange fee," "payment card," "payment card issuer," "payment card network," "state or local tax," and "swipe fee." Sec. 610.002. EXCLUSION OF STATE OR LOCAL TAXES AND GRATUITY FROM SWIPE FEES; MERCHANT DEDUCTION OR REBATE. (a) Requires that the amount of state or local tax that is calculated as a percentage of the amount of an electronic payment transaction made in this state and gratuity that is listed separately on a payment invoice or other demand for payment be excluded from the total amount on which a swipe fee is charged for that transaction. (b) Requires that a payment card network with respect to each form or type of electronic payment transaction deduct the amount of state or local tax imposed and gratuity from the calculation of swipe fees attributable to the transaction at the time of settlement or rebate the merchant an amount equal to the amount of swipe fees attributable to the state or local tax imposed and gratuity on the transaction. (c) Requires that a deduction or rebate under this section occur at the time of settlement when the merchant is able to capture and transmit state or local tax or fee amounts and gratuity relevant to the sale at the time of sale as part of the transaction finalization. Requires the payment card network, if a merchant is unable to capture and transmit tax or fee and gratuity amounts relevant to the sale at the time of sale, to accept proof of tax or fee amounts and gratuity collected on sales subject to a swipe fee on the submission of sales data by the merchant and provide the rebate no later than 180 days after the date of the electronic payment transaction, and, within 30 days after the merchant submits the sales data. (d) Provides that this section does not create liability for a payment card network regarding the accuracy of the tax or gratuity data reported by the merchant. (e) Requires that it be unlawful for a payment card issuer or a payment card network to alter or manipulate the computation and imposition of swipe fees by increasing the rate or amount of the fees applicable to or imposed upon the portion of an electronic payment transaction not attributable to taxes or gratuities to circumvent the effect of this section. Sec. 610.003. CIVIL PENALTY; RESTITUTION. (a) Provides that a person who violates this chapter is liable to this state for a civil penalty in an amount not to exceed $1,000 for each violation. (b) Authorizes the attorney general to bring an action to recover the civil penalty imposed under this section or obtain a temporary or permanent injunction to restrain the violation. (c) Authorizes an action under this section to be brought in a district court in Travis County or a county in which any part of the violation occurs. (d) Requires the attorney general to deposit a civil penalty collected under this section in the state treasury to the credit of the general revenue fund. (e) Requires a person who violates this chapter to refund a merchant any swipe fees charged in violation of this chapter. SECTION 2. Severability clause. SECTION 3. Effective date: September 1, 2025.
BILL ANALYSIS
Senate Research Center S.B. 2026
By: Campbell
Business & Commerce
4/1/2025
As Filed
Senate Research Center
S.B. 2026
By: Campbell
Business & Commerce
4/1/2025
As Filed
AUTHOR'S / SPONSOR'S STATEMENT OF INTENT
Merchants such as restaurants, hotels, retail stores, and many other small businesses pay banks and payment card companies like Visa and Mastercard an interchange fee and a network or assessment fee when customers pay for a transaction using a credit or debit card. Commonly referred to as "swipe fees," these fees typically range from three percent to five percent for credit card transactions. Since swipe fees are calculated as a percentage of the entire transaction that the merchant is required by law to collect, they are paying card processors a significant fee to be the government's tax collector. These swipe fees have become incredibly expensive for merchants, particularly in today's inflationary market.
In 2023, local businesses paid over $1 billion in these fees to Wall Street just to collect Texas' sales tax. Because they are not set in a competitive, transparent market, U.S. credit card swipe fees are the highest in the industrialized world. On average, Americans pay about six times the rate that they pay in Europe.
S.B. 2026 protects merchants from swipe fees only when they are collecting (1) state and local taxes as required by the government and (2) tips for their employees. Specifically, the bill requires card networks to either:
Creating both options ensures card networks have multiple methods to comply, eliminating any potential technology barriers.
As proposed, S.B. 2026 amends current law relating to the charging of swipe fees on certain electronic payment transaction and authorizes a civil penalty.
RULEMAKING AUTHORITY
This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Title 12, Business & Commerce Code, by adding Chapter 610 to read as follows:
CHAPTER 610. CHARGING OF SWIPE FEES
Sec. 610.001. DEFINITIONS. Defines "assessment fee," "electronic payment transaction," "gratuity," "interchange fee," "payment card," "payment card issuer," "payment card network," "state or local tax," and "swipe fee."
Sec. 610.002. EXCLUSION OF STATE OR LOCAL TAXES AND GRATUITY FROM SWIPE FEES; MERCHANT DEDUCTION OR REBATE. (a) Requires that the amount of state or local tax that is calculated as a percentage of the amount of an electronic payment transaction made in this state and gratuity that is listed separately on a payment invoice or other demand for payment be excluded from the total amount on which a swipe fee is charged for that transaction.
(b) Requires that a payment card network with respect to each form or type of electronic payment transaction deduct the amount of state or local tax imposed and gratuity from the calculation of swipe fees attributable to the transaction at the time of settlement or rebate the merchant an amount equal to the amount of swipe fees attributable to the state or local tax imposed and gratuity on the transaction.
(c) Requires that a deduction or rebate under this section occur at the time of settlement when the merchant is able to capture and transmit state or local tax or fee amounts and gratuity relevant to the sale at the time of sale as part of the transaction finalization. Requires the payment card network, if a merchant is unable to capture and transmit tax or fee and gratuity amounts relevant to the sale at the time of sale, to accept proof of tax or fee amounts and gratuity collected on sales subject to a swipe fee on the submission of sales data by the merchant and provide the rebate no later than 180 days after the date of the electronic payment transaction, and, within 30 days after the merchant submits the sales data.
(d) Provides that this section does not create liability for a payment card network regarding the accuracy of the tax or gratuity data reported by the merchant.
(e) Requires that it be unlawful for a payment card issuer or a payment card network to alter or manipulate the computation and imposition of swipe fees by increasing the rate or amount of the fees applicable to or imposed upon the portion of an electronic payment transaction not attributable to taxes or gratuities to circumvent the effect of this section.
Sec. 610.003. CIVIL PENALTY; RESTITUTION. (a) Provides that a person who violates this chapter is liable to this state for a civil penalty in an amount not to exceed $1,000 for each violation.
(b) Authorizes the attorney general to bring an action to recover the civil penalty imposed under this section or obtain a temporary or permanent injunction to restrain the violation.
(c) Authorizes an action under this section to be brought in a district court in Travis County or a county in which any part of the violation occurs.
(d) Requires the attorney general to deposit a civil penalty collected under this section in the state treasury to the credit of the general revenue fund.
(e) Requires a person who violates this chapter to refund a merchant any swipe fees charged in violation of this chapter.
SECTION 2. Severability clause.
SECTION 3. Effective date: September 1, 2025.