Opinion: Credit card 'swipe' fees are a double taxation on Florida businesses

As a third-generation local and small family restaurant, we have faced our fair share of challenges to remain profitable and keep our doors open. Now, small businesses are faced with unethical practices by the Visa and Mastercard duopoly, along with the big banks in New York City that have left us hamstrung.

Unlike these powerful financial institutions, restaurants are the cornerstone of Florida’s communities where we live and work. By the end of 2023, restaurants are expected to contribute nearly $1 trillion (yes, trillion) to the national economy, so it comes as no surprise that restaurants and merchants are some of the largest collectors of state and local taxes that we collect and remit.

But today, banks and credit card companies have found a way to make a greater profit off the backs of small businesses by charging merchants a fee for collecting and remitting a tax that is mandated by law. 

The interchange fees, also known as “swipe” fees, are collected by credit card companies from hardworking business owners on both the item or service being sold, as well as on the tax mandated portion that is collected and remitted by the merchant. This hidden tax costs businesses an estimated $6 billion annually – a cost that in many cases impacts the consumer by driving up the cost of items and services.

Restaurant owners like me dutifully remit 100% of sales taxes to state and local governments as required by law. Since swipe fees are calculated as a percentage of the entire transaction – including taxes – financial institutions are cashing in on the fees they assess on taxes, while restaurants like mine only recoup a mere $30 per month of the taxes we collect on behalf of the state. In fact, in Florida in 2021, restaurants, retailers, hoteliers and other small businesses paid the card networks and big banks more than $320 million in swipe fees on the sales tax portion of sales.

As credit card usage continues to be on the rise, nearly every purchase at my restaurant, Sergio’s, is paid for with plastic. And many of our customers tend to use premium cards that earn them points and offer amazing rewards. But did you know that merchants pay for those rewards because banks charge us higher swipe fees for premium cards? And that behind the scenes, restaurants are being charged anywhere from 2% to roughly 4% in swipe fees to process those electronic payments that help fund this credit card rewards Ponzi scheme?

But the symptoms of this broken payment ecosystem aren’t limited to my restaurant. Credit card swipe fees have doubled in the last decade and increased 20% in just the last year, making them the third highest expense for many restaurants across the country.

Accepting a credit card payment is an absolute imperative for restaurant owners and operators to best serve their customers and, ultimately, stay in business. But these fees are growing too cumbersome for small businesses to absorb and must be added into menu prices just like other expenses, further contributing to inflation. The difference is that restaurants and other small businesses in Florida do not have the ability to negotiate the fees imposed by Visa and Mastercard that control 80% of the market.

This market dominance allows the card industry to get away with their “take it or leave it” approach time and time again. Big banks and card networks are swiping away profits for themselves off of Florida small businesses who collect the sales taxes that fund our public services, roads, and emergency services.  

That is why we wholeheartedly support SB 564 by state Sen. Travis Hutson that would prohibit swipe fees from being charged to the merchant on the taxable portion of the transaction. Sen. Hutson has stated that this is a “tax on a tax.” So instead of a restaurant like mine paying what amounts to a roughly 3% fee that’s applied to the menu price of a meal plus the 6% sales tax, the fee would only be administered on the menu price.

Collecting fees on the tax portion of the goods and services is an easy way for these credit card companies and banks to make a profit from Florida’s businesses and consumers. This legislation would serve as a simple, yet effective tool to stop these out-of-state financial institutions from having a stranglehold over the merchant community.

Small businesses like mine are the backbone of the Sunshine State economy – not big corporate banks on Wall Street or global behemoths Visa and Mastercard. And though it may not seem like a big financial benefit for merchants, when the change is applied across the millions of transactions that take place every day in the state, it definitely adds up.

As such, the restaurant industry implores every Florida lawmaker – regardless of political affiliation – to pass SB 564 and send it to the governor’s desk. Together, we can help build a stronger economy that benefits all Floridians.