Are credit card surcharges illegal in California?
California Ban on Credit Card Surcharges Is Illegal, 9th Circuit Says. California Civil Code Section 1748.1(a) prohibits retailers from imposing a surcharge on customers who pay with a credit card, but allows them to offer discounts for cash or check. Italian Colors Restaurant and four other California businesses sued in 2014,...
Does California's surcharge law violate the First Amendment?
The three-judge panel affirmed a lower court finding that the 1985 law banning retailers from imposing the surcharge violates the First Amendment, concluding the law restricts commercial speech and does not advance California's stated interest of preventing consumer deception.
Where is surcharging allowed in the US?
Surcharging is currently permitted in Australia, Mexico, and New Zealand, and on certain credit card transactions in the U.S. Surcharging isn’t allowed everywhere in the U.S. Currently, there are laws limiting surcharging in Colorado, Connecticut, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas.
How much can I charge for surcharges?
Surcharge amounts are limited to your effective rate for credit card transactions, capped at 4% (2% in Colorado). In other words, you can’t profit from surcharges; you can only recoup your baseline costs. You must post appropriate notice inside your store, both at the entrance and at the point of sale.
Are debit card surcharges legal in California?
1748.1. (a) No retailer in any sales, service, or lease transaction with a consumer may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check, or similar means.
What is a California surcharge?
Our carriers have started to assess a surcharge to cover increasing costs for regulatory compliance for shipments into California. The current surcharge of $15.00 for freight shipments. We have elected not to charge an additional fee for small items.
Are credit card processing fees legal in California?
Ten states prohibit credit card surcharges and convenience fees: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.
What states are surcharges illegal?
Eleven states—California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas—and Puerto Rico have laws that prohibit merchants from charging consumers with surcharges on credit card transactions.
Is it legal to add a service charge to a bill?
Re: "Optional Service Charge" - legal? The service charge, usually 12.5%, is discretionary and quite 'legal'. If you deem service as unacceptable or do not wish to pay you may ask to have it removed from the bill.
Are convenience fees legal?
Convenience fees are legal in all 50 states but have to be clearly communicated at the point of sale. Additionally, a convenience fee can only be imposed if there's another preferred form of payment as an option.
Is it illegal to charge a surcharge on credit cards?
Similarly, the ban was lifted in states such as California, Texas, Florida, Oklahoma and Maine. This leaves Kansas, Colorado, Massachusetts, Connecticut and Puerto Rico as the only remaining places in the U.S. where it's still illegal for merchants to impose a credit card surcharge.
Can you pass on credit card fees to customers?
When it comes to passing on credit card fees to customers, you can either do it directly or indirectly. Passing the fees on directly means that your customer covers the cost of their credit card purchases and you pay less or nothing at all.
Are card processing fees legal?
It is legal to charge a credit card processing fee in 40 out of 50 states if it's a surcharge and in all states if it's a convenience fee. A surcharge is an added cost just for using a credit card, while a convenience fee is a charge for doing a transaction that's unusual for the merchant (e.g. over the phone).
Does Visa allow surcharging?
No. The settlement agreement impacts Visa's rules related to the surcharging of credit card purchases made in the U.S. and U.S. territories only. Surcharging remains prohibited outside the U.S. unless there is a local law or variance that requires merchants be permitted to engage in the practice.
What states can charge the debit card surcharge 2021?
As of March 2021, most U.S. states allow merchants to surcharge on credit card transactions, with only Colorado, Connecticut, and Massachusetts having laws against surcharging.
What is the difference between a surcharge and a convenience fee?
A surcharge is not a convenience fee. A convenience fee is levied by a merchant for offering customers the privilege of paying with an alternative non-standard payment method. Merchants can process convenience fees in all 50 states. A surcharge is levied by a merchant for customer purchases made with a credit card.
What is a surcharge charge?
A surcharge, also known as checkout fee, is an extra fee charged by a merchant when receiving a payment by cheque, credit card, charge card or debit card (but not cash) which at least covers the cost to the merchant of accepting that means of payment, such as the merchant service fee imposed by a credit card company .
How much is a surcharge?
Surcharges are usually small, up to 10% of your total bill, and they're "meant to contend with a specific cost increase," such as labor or healthcare, Shams explained. Fees can be much higher, sometimes up to 20% of your bill, and they're most common at restaurants that have opted out of tipping.
What is the law that prohibits retailers from adding a surcharge when a consumer chooses to use a?
California has a law, California Civil Code section 1748.1, that prohibits retailers from adding a surcharge when a consumer chooses to use a credit card instead of paying by cash. In March 2015, a federal court found the statute unconstitutional and prohibited the Attorney General from enforcing it.
Where are credit card surcharges illegal?
Credit card surcharges are illegal in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, Maine and Texas.
Is shipping taxable if you have shipping and handling?
Shipping is not taxable if listed separately, but handling is taxable. So when you have a combined shipping and handling charge, shipping becomes taxable.
Do you pay sales tax on labor charges in California?
However, in California many types of labor charges are subject to tax. Generally, if you perform taxable labor in California, you must obtain a seller's permit and report and pay tax on your taxable sales.
Is shipping and handling taxable in California?
When You Do Charge Sales Tax on Shipping in California Handling charges are taxable in California and so is shipping if you put the two together into a “shipping and handling” line on your invoice. If the customer has taken possession at your location (i.e., prepaid), the delivery charges are not subject to sales tax.
What states prohibit charging extra for credit card purchases?
9 other states have also put into place laws prohibiting this: Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas.
Does a surcharge appear on a receipt?
Surcharge amount must appear as a separate line item on their customer receipts.
Is surcharge bad for credit cards?
It’s not all bad. While merchants will slowly begin to test credit card surcharging in their businesses, there are some strict rules they need to follow to be compliant otherwise they risk being fined by the card brands. Here they are: The surcharge cannot be more than 4%.
Is Visa a surcharge?
Visa and Mastercard also had industry rules not to surcharge either. Fast forward to 2013, when Visa and Mastercard settle a lawsuit removing the network rules that prohibited surcharging. 40 states are now legally allowed to have credit card surcharges.
Can a surcharge be more than 4%?
Here they are: The surcharge cannot be more than 4%. The surcharge cannot be more than their payment processing fees. Surcharges allowed on credit cards only, not on debit cards – this includes debit with and without a pin code (aka offline debit)
Is surcharging legal in California?
As a buyer who prefers to use their credit card, you may be upset that credit card surcharging in California is now legal, however, there is a reason it exists. Business owners are charged extra by their card processor to transfer funds by credit card instead of cash. If businesses can pass the fee on to the customers, ...
Which amendment prohibits retailers from imposing surcharges?
The three-judge panel affirmed a lower court finding that the 1985 law banning retailers from imposing the surcharge violates the First Amendment, concluding the law restricts commercial speech and does not advance California's stated interest of preventing consumer deception.
Who is the California Deputy Attorney General?
California Deputy Attorney General John Killeen represented the state. His office said by email it is evaluating its options.
Is surcharges on credit cards unconstitutional?
A Ninth Circuit panel on Wednesday agreed a California law banning surcharges for credit card purchases is unconstitutional and modified an injunction barring its enforcement, but cautioned the ruling only applies to the handful of businesses that had challenged it.
Standards of Reasonableness
Clearly, these businesses have suffered serious economic hits as the coronavirus prompted cities and states to force shutdowns. No doubt these surcharges are intended to make up for some of the lost revenue, but many businesses also now have new additional expenses.
Why Not Just Jack Up Prices?
Of course, a business could merely just jack up its prices without saying a word — no doubt, many do — so a COVID-19 surcharge would seem to be a more honest action for them to take. After all, it implies that when we are looking at COVID-19 in our rearview mirrors, those surcharges will be lifted.
What is surcharging on credit card?
Surcharging is the practice of adding a small fee to a credit card transaction to cover the merchant’s costs for processing the payment. Instead of the merchant having to absorb this expense, the customer who chooses to pay by credit card pays for the processing costs that do not apply to other payment methods.
What is the surcharge rate in Colorado?
Surcharge amounts are limited to your effective rate for credit card transactions, capped at 4% (2% in Colorado). In other words, you can’t profit from surcharges; you can only recoup your baseline costs.
What is the difference between surcharging and cash discounting?
While both of these methods serve to pass the cost of credit card processing onto the consumer, the only apparent difference between the two is that with surcharging, the extra cost is added to the advertised price. With cash discounting, the cost is deducted from the advertised price when a credit card is not used. For merchants, the most important distinction between these two methods is that cash discounting is legal everywhere in the US, whereas surcharging credit cards is still prohibited in a couple of states and territories.
Why do credit card companies charge surcharges?
Credit card surcharging has rapidly gained in popularity in recent years as court decisions and legislative changes have gradually removed legal barriers to the practice. The ongoing COVID-19 pandemic has greatly accelerated this trend. Merchants struggling to stay afloat have increasingly turned to credit card surcharging as a way to lower operating expenses and keep their businesses profitable. All but a few states now allow the practice, making it a viable option for most small business owners in the US. Nonetheless, the question remains: Should you add a surcharge?
Which states require additional disclosures to surcharge credit card processing fees?
Two states require additional disclosures to surcharge credit card processing fees: Maine and New York. In both cases, you must post both the cost of paying with cash and the cost of paying with a card using dollars and cents. This is on top of Visa, Mastercard, American Express, and Discover requirements, which require you to post notifications at the point of sale and specify the surcharge amount.
How far in advance do you have to notify American Express of a surcharge?
You must notify the card association and your merchant services provider of your intent, in writing, at least 30 days in advance. (Note: American Express surcharge rules do not require you to provide notice so long as you comply with all other rules.)
Do you need to check the laws for your business?
You will need to check the laws for the state (s) your business operates in. Over the past several years, the number of jurisdictions that prohibit credit card surcharging has diminished as legal challenges have resulted in many laws banning the practice being overturned by the courts.
How much is a surcharge?
Surcharges are usually small, up to 10% of your total bill, and they're "meant to contend with a specific cost increase," such as labor or healthcare, Shams explained. Fees can be much higher, sometimes up to 20% of your bill, and they're most common at restaurants that have opted out of tipping.
Why did Greenberg impose a surcharge?
The potential awkwardness of customers discovering an extra fee at the end of their meal drove Greenberg's decision to do away with tips and impose a surcharge.
What is the service fee for HiHo Cheeseburger?
Locally, HiHo Cheeseburger in Santa Monica adds a 6% service fee to your order. In downtown L.A., Singaporean bistro Little Sister tacks on a 3% surcharge while Guerrilla Tacos adds a 3% charge.
Why is there a service charge at the Alamo Drafthouse?
In downtown Los Angeles, the swanky, new Alamo Drafthouse hits you with a 3% service charge so they can pay their "back-of-house employees a competitive livable wage."
When did HiHo start 6% surcharge?
HiHo explains its 6% surcharge, implemented in July 2019, in a bold, red font about three-fourths of the way down the menu -- below its listings for burgers, salads and desserts but above its beverage and milkshake options.
Is surcharges on the rise in Los Angeles?
If you think you're seeing these surcharges more often than you used to, you're not wrong. They've been on the rise in Los Angeles, according to Sharokina Shams of the California Restaurant Association.
Do businesses have to disclose surcharges?
Businesses aren't legally obligated to disclose surcharges but doing so can help them avoid consumer claims, law firm Wilson Elser Moskowitz Edelman & Dicker LLP explains in an article on the California Restaurant Association's site. The firm advises restaurants to describe the charge using broad language so they have more flexibility over how to use the money.
