Credit and Debit Cards

AN ACT to amend Tennessee Code Annotated, Title 67, relative to taxes and fees collected by merchants and sellers.

Taxes

Active

The official status still shows this bill as active or still awaiting another formal step.

Sponsor: Hawk, Briggs
Last action: 2025-02-11
Official status: Assigned to s/c Banking & Consumer Affairs Subcommittee
Effective date: Not listed

Plain English Breakdown

The bill does not specify how merchants will prove tax amounts if they cannot capture them at the time of sale.

Excluding Taxes from Credit Card Fees

This bill requires payment card networks to exclude state and local taxes listed separately on invoices when calculating interchange fees for electronic transactions.

What This Bill Does

Defines key terms like credit cards, debit cards, electronic payment transactions, and interchange fees.
Requires that state and local taxes listed separately on invoices be excluded from the amount used to calculate interchange fees for electronic payments.
Specifies that payment card networks must either deduct tax amounts from interchange fees or rebate the fee proportionate to the tax amount at settlement time if merchants can capture these details during a sale.
Allows merchants to submit proof of collected taxes if they cannot capture these details during a sale, ensuring timely credits to their accounts.

Who It Names or Affects

Merchants and sellers who collect state and local taxes on electronic transactions.
Payment card networks that process electronic payment transactions.

Terms To Know

Interchange fee: A fee charged by a payment card network to compensate the issuer of a credit or debit card for processing an electronic transaction.
Settlement: The process where funds are transferred from a customer's account to a merchant upon finalization of sales transactions through a payment card network.

Limits and Unknowns

It is not specified how merchants will prove tax amounts if they cannot capture them at the time of sale.
There is no information on what happens if a payment card network fails to comply with the requirements set by this act.

Bill History

2025-02-12 Tennessee General Assembly
Passed on Second Consideration, refer to Senate Commerce and Labor Committee
2025-02-11 Tennessee General Assembly
Assigned to s/c Banking & Consumer Affairs Subcommittee
2025-02-10 Tennessee General Assembly
P2C, ref. to Commerce Committee
2025-02-10 Tennessee General Assembly
Introduced, Passed on First Consideration
2025-02-06 Tennessee General Assembly
Intro., P1C.
2025-02-05 Tennessee General Assembly
Filed for introduction
2025-01-28 Tennessee General Assembly
Filed for introduction

Official Summary Text

This bill requires

t
he amount of a state or local tax or fee that is calculated as a percentage of an electronic payment transaction amount and listed separately on the payment invoice or other demand for payment, or the amount of a tax imposed under
the
Petroleum Products and Alternative Fuels Tax Law
,
to
be excluded from the amount on which an interchange fee is charged for that electronic payment transaction. Such taxes and fees include, but are not limited to
, (i) s
ales and use taxes
,
(
ii
)
h
otel occupancy taxes
and relate
d taxes,
(
iii
)
a
lcoholic beverage taxes
, and
(
iv
)
r
ental vehicle surcharge taxes.

DEDUCTIONS OR REBATES REQUIRED

This bill requires a payment card network to either (i) d
educt the amount of a tax imposed from the calculation of interchange fees specific to each form or type of electronic payment transaction at the time of settlement; or
(ii) r
ebate an amount of interchange fee proportionate to the amount attributable to the tax or fee.

A deduction or rebate must occur at the time of settlement when the merchant or seller is able to capture and transmit tax or fee amounts relevant to the sale at the time of sale as p
art of the transaction finalization.

If a merchant or seller is unable to capture and transmit tax or fee amounts relevant to the sale at the time of sale, then the payment card network
must
accept proof of tax or fee amounts collected on sales subject to an interchange fee upon the submission of sales data by the merchant or seller and promptly credit the merchant or seller's settlement account.

VIOLATIONS
–
PENALTIES

This bill provides that a
payment card network that violates this
bill
is subject to a civil penalty of not more than $1,000

per violation, payable to the plaintiff, and
must
refund the surcharge to each merchant or seller.

Current Bill Text

Read the full stored bill text

SENATE BILL 370
By Briggs

HOUSE BILL 967
By Hawk

HB0967
001774
- 1 -

AN ACT to amend Tennessee Code Annotated, Title 67,
relative to taxes and fees collected by merchants
and sellers.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Title 67, Chapter 1, is amended by adding
the following as a new part:
67-1-1901. As used in this part:
(1) "Credit card" means a card, plate, coupon book, or other credit device
existing for the purpose of obtaining money, property, labor, or services on credit;
(2) "Debit card":
(A) Means a card, or other payment code or device, issued or approved
for use through a payment card network to debit an asset account, regardless of
the purpose for which the account is established, whether authorization is based
on signature, personal identification number, or other means;
(B) Includes a general-use prepaid card, as defined in 15 U.S.C. § 1693l-
1; and
(C) Does not include paper checks;
(3) "Electronic payment transaction" means a transaction in which a person uses
a debit card, credit card, or other payment code or device, issued or approved through a
payment card network to debit a deposit account or use a line of credit, whether
authorization is based on a signature, personal identification number, or other means;

- 2 - 001774

(4) "Interchange fee" means a fee established, charged, or received by a
payment card network for the purpose of compensating the issuer for its involvement in
an electronic payment transaction;
(5) "Issuer" means a person issuing a debit card or credit card, or the issuer's
agent;
(6) "Payment card network" means an entity that:
(A) Directly, or through licensed members, processors, or agents
provides the proprietary services, infrastructure, and software that routes
information and data to conduct debit card or credit card transaction
authorization, clearance, and settlement; and
(B) A merchant or seller uses in order to accept as a form of payment a
brand of debit card, credit card, or other device that may be used to carry out
debit or credit transactions; and
(7) "Settlement" means the transfer of funds from a customer's account to a
seller or merchant upon electronic submission of finalized sales transactions to the
payment card network.
67-1-1902. The amount of a state or local tax or fee that is calculated as a percentage
of an electronic payment transaction amount and listed separately on the payment invoice or
other demand for payment, or the amount of a tax imposed under chapter 3 of this title, must be
excluded from the amount on which an interchange fee is charged for that electronic payment
transaction. Such taxes and fees include, but are not limited to:
(1) Sales and use taxes under chapter 6 of this title;
(2) Hotel occupancy taxes under § 67-4-1402; an applicable private act; title 7,
chapter 4; or chapter 4, part 15 of this title;
(3) Alcoholic beverage taxes under § 57-4-301(c); and

- 3 - 001774

(4) Rental vehicle surcharge taxes under chapter 4, part 19 of this title.
67-1-1903.
(a) A payment card network shall either:
(1) Deduct the amount of a tax imposed from the calculation of
interchange fees specific to each form or type of electronic payment transaction
at the time of settlement; or
(2) Rebate an amount of interchange fee proportionate to the amount
attributable to the tax or fee.
(b) A deduction or rebate must occur at the time of settlement when the
merchant or seller is able to capture and transmit tax or fee amounts relevant to the sale
at the time of sale as part of the transaction finalization.
(c) If a merchant or seller is unable to capture and transmit tax or fee amounts
relevant to the sale at the time of sale, then the payment card network shall accept proof
of tax or fee amounts collected on sales subject to an interchange fee upon the
submission of sales data by the merchant or seller and promptly credit the merchant or
seller's settlement account.
67-1-1904. A payment card network that violates this part is subject to a civil penalty of
not more than one thousand dollars ($1,000) per violation, payable to the plaintiff, and shall
refund the surcharge to each merchant or seller.
SECTION 2. This act takes effect July 1, 2025, the public welfare requiring it.