Bills in Pennsylvania, Massachusetts and New Jersey would stop card fees on sales tax and tips, and they could pass within weeks.
Lawmakers in three states are pushing bills that would stop card fees from being charged on sales tax and, in two cases, on tips. Pennsylvania, Massachusetts and New Jersey could pass their bills before their sessions end, between Nov. 30 and Jan. 5, 2027. Shops and restaurants would be the ones to benefit, at least on paper.
Every time a customer pays with a credit card, the bank that issued the card charges the merchant a fee called interchange. Today that fee applies to the full amount, including sales tax and any tip. The bills say merchants should not pay it on money they collect for the state or hand to staff.
New York Assemblyman John T. McDonald III, a pharmacist, said a liquor store owner told him he gets hit with a fee for collecting sales tax for the state. McDonald says New York pays merchants to collect the tax, but usually not enough to cover the fee. His own bill sat in committee when the Assembly adjourned in June.
The bills try to block workarounds. New Jersey and Massachusetts would bar higher rates on the rest of the purchase to make up for lost fee income. Pennsylvania would bar networks from raising other fees to get around the rule. Whether prices or card rules change for shoppers is not clear.
Illinois already passed a similar law, the Interchange Fee Prohibition Act, and it is being challenged in court. Oral arguments are expected in late January before the Seventh Circuit appeals court in Chicago. Scott Talbott of the Electronic Transactions Association, a payments trade group, warned that passing a law before that case is settled would likely draw a lawsuit.
The group counts 32 card-fee bills in 20 states this year. Since 2025 the count is 75 bills in 32 states. The New Jersey bills are in committee, and Pennsylvania adjourns Nov. 30. The Massachusetts bill was sent for further study, with results due by year end. None has passed yet.
Three states could cut card fees on sales tax and tips soon, but a court fight in Illinois may decide how far such laws can go.
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