Bill Text: NJ S4360 | 2026-2027 | Regular Session | Introduced
Bill Title: Prohibits credit and debit card interchange fees from being applied to sales tax and gratuity.
Sponsorship: Partisan Bill (Democrat 1)
Status: (Introduced) 2026-05-28 - Introduced in the Senate, Referred to Senate Commerce Committee [S4360 Detail]
Download: New_Jersey-2026-S4360-Introduced.html
Sponsored by:
Senator JOSEPH A. LAGANA
District 38 (Bergen)
SYNOPSIS
Prohibits credit and debit card interchange fees from being applied to sales tax and gratuity.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning certain interchange fees and supplementing Title 56 of the Revised Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. As used in this act:
"Authorization" means the process through which a merchant requests approval for an electronic payment transaction from the issuer.
"Clearance" means the process of transmitting final transaction data from a merchant to an issuer for posting to the cardholder's account and the calculation of fees and charges, including interchange fees, that apply to the issuer and the merchant.
"Credit card" means a card, plate, charge card, charge plate, or other single credit device that may be used from time to time to obtain credit.
"Debit card" means any instrument or device, whether known as a debit card, automated teller machine card, or by any other name, issued with or without fee by an issuer for the use of the cardholder in obtaining money, goods, services or anything else of value through the electronic authorization of a financial institution to debit the account of the debit card holder. The term shall include a general-use prepaid card, as defined in 15 U.S.C. s.1693l-1. The term does not include a paper check.
"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.
"Gratuity" means money voluntarily given to an employee from a guest, patron, or customer in connection with services rendered.
"Interchange fee" means a fee established, charged, or received by a payment card network for the purpose of compensating the issuer for the issuer's involvement in an electronic payment transaction.
"Issuer" means the business organization or financial institution which issues a credit card or its duly authorized agent.
"Merchant" means a person that accepts electronic payment transactions and collects and remits a tax.
"Payment card network" means an entity that meets the following criteria:
(1) directly, or through licensed members, processors, or agents, provides proprietary services, infrastructure, and software that routes information and data to conduct debit card or credit card transaction authorization, clearance, and settlement; or
(2) a merchant or seller that uses a credit card or other device that may be used to carry out debit or credit transactions in order to accept as a form of payment a brand of debit card.
"Processor" means an entity that facilitates, services, processes, or manages a debit or credit authorization, billing, transfer, payment procedures, or settlement of an electronic payment transaction.
"Settlement" means the transfer of funds from a customer's account to a seller or merchant upon electronic submission of finalized sales transactions to a payment card network.
"Surcharge" means any means of increasing the regular price to a cardholder that is not imposed on customers paying by cash, check, or similar items.
"Tax" means any tax imposed under the "Sales and Use Tax Act," P.L.1966, c.30, s.1 (C.54:32B-1 et. seq.).
2. a. A payment card network may not establish, receive, or charge any interchange fee on the tax or gratuity amount of an electronic payment transaction, provided the merchant transmits the tax or gratuity amount as part of the authorization or settlement process for the electronic payment transaction.
b. A merchant that does not transmit the tax or gratuity amount data in accordance with subsection a. of this section may submit gratuity data for the electronic payment transaction to the payment card network or its designee no later than 180 days after the date of the electronic payment transaction and, within 30 days after the merchant submits the necessary information, the payment card network shall credit to the merchant, the amount of interchange fees charged on the tax and gratuity amounts of the electronic payment transaction.
c. A payment card network shall not alter or manipulate the computation and imposition of interchange fees by increasing the rate or amount of the fees applicable to or imposed upon the portion of a credit or debit card transaction not attributable to the tax or gratuity amount or other fees charged to the merchant to circumvent the effect of this section.
d. This section shall not create liability for a payment card network regarding accuracy of the tax or gratuity data reported by the merchant.
3. A payment card network that violates this act is subject to a civil penalty of $1,000 per electronic payment transaction, and the payment card network shall refund to the merchant the interchange fee calculated on the gratuity or tax amount relative to the electronic payment transaction.
4. This act shall take
effect 180 days after the date of enactment and shall apply to transactions
performed on or after that date.
STATEMENT
This bill prohibits payment card networks from including sales tax and gratuity when applying interchange fees to transactions.
An interchange fee is a fee collected by a payment card network from merchants when processing debit and credit card purchases. The fee is collected by a payment processor and then passed to the card issuer. Interchange fees range from 1.5 percent to 3.5 percent depending on the type of card, method of transaction, processing details, and the size of the transaction. Interchanges fees help cover issuing banks' expenses in processing card transactions and provide an incentive for them to keep offering such services.
Under the bill, payment card networks are prohibited from charging an interchange fee on a gratuity amount or tax of an electronic payment transaction so long as the merchant transmits the gratuity amount as part of the authorization or settlement process for the electronic payment transaction. A merchant may also submit gratuity data for the electronic payment transaction to the payment card network no later than 180 days after the date of the electronic payment transaction and the payment card network must credit the amount of interchange fee charged on the gratuity amount of the electronic payment transaction within 30 days after the merchant submits documentation. Payment card networks found to be in violation of the bill will be subject to a $1,000 fine.
This bill is intended to provide relief to business owners who are impacted by credit card fees and allow small businesses in the service industry to hire more employees, invest in their business, and continue to serve their communities.
