Bill
S 688
Prohibits charging interchange fees on the tax or gratuity portion of electronic payments if the merchant transmits those amounts during authorization or settlement.
Note on document inconsistencies
- The materials you provided include multiple, conflicting metadata (an initial title about a real‑property tax exemption, federal sponsor lists, and committee actions) but the bill text itself and the docket heading identify this as Massachusetts Senate Bill No. 688 (filed 1/14/2025, presented by Sen. Cynthia Stone Creem). The actual text amends Massachusetts law (Chapter 140D) and addresses payment card interchange fees — specifically prohibiting interchange fees on taxes and gratuities. This summary describes the substance of the bill text provided.
Purpose and intent
- To prohibit payment card issuers, payment card networks, acquirer banks, and processors from charging or receiving interchange fees on the portion of an electronic payment transaction that represents a tax or gratuity, provided the merchant transmits the tax/gratuity amount as part of the authorization or settlement process.
Key provisions (section-by-section highlights)
- Definitions: The bill defines key terms including acquirer bank, authorization, clearance, credit card, debit card (including general‑use prepaid cards), electronic payment transaction, gratuity, interchange fee, issuer, merchant (a person that collects and remits a tax), payment card network, processor, settlement, tax, and tax documentation.
- Prohibition on interchange fees (subsec. b): Issuers, payment card networks, acquirers, and processors may not receive or charge a merchant an interchange fee on the tax amount or gratuity of an electronic payment transaction if the merchant provides the tax/gratuity amount during authorization or settlement.
- Reimbursement procedure (subsec. c): If a merchant failed to transmit the tax/gratuity data at transaction time, the merchant may submit tax documentation to the acquirer (or designee) within 180 days. Within 30 days of that submission, the issuer must credit the merchant the interchange fee charged on the tax/gratuity portion.
- No liability for accuracy of merchant data (subsec. d): The bill does not impose liability on payment card networks for the accuracy of merchant‑reported tax/gratuity amounts.
- Anti‑circumvention provision (subsec. e): It is unlawful for the card ecosystem participants to alter or manipulate interchange fee computation by increasing rates or fees on the non‑tax/gratuity portion of transactions to offset this prohibition.
- Penalties (subsec. f): A violating issuer, payment card network, acquirer, processor, or designated entity faces a civil penalty of $1,000 per electronic payment transaction and must refund the interchange fee calculated on the tax/gratuity amount.
- Severability (subsec. g): Standard severability clause.
Who is affected
- Merchants (particularly retail, hospitality, food service) that accept card payments and collect taxes and gratuities — they may reduce interchange expense on tax/tip line items if they transmit amounts correctly.
- Issuers, payment card networks, acquirer banks, and processors — restricts revenue from interchange on tax/tip amounts and imposes compliance obligations and potential penalties.
- Consumers — indirect effects: could influence merchant decisions about payment acceptance, surcharge policies, or point‑of‑sale design for tip/tax processing.
- State and local tax authorities — minimal direct effect; tax remittance requirements unchanged.
Implementation and procedure / timeline (from provided actions)
- Filed in Massachusetts Senate: 1/14/2025 (Sen. Cynthia Creem).
- Committee referrals and actions in the provided record include advancement, amendment on third reading (688A), passage in the Senate (04/01/2025), delivery to the Assembly, substitution for Assembly bill A5619A and passage in the Assembly (06/11/2025), and return to the Senate (06/11/2025). Committee hearings and scheduling entries are also noted (various dates in 2025).
- Status line in your material: “RETURNED TO SENATE.”
Potential impacts and considerations
- Cost savings for merchants on taxes/gratuities (if technically implemented).
- Operational and technical changes required: merchants/acquirers/processors must support transmitting tax/gratuity line‑item data in authorization/settlement flows or maintain documentation and claims processes.
- Compliance and enforcement: $1,000 per‑transaction penalty is substantial and could drive litigation or compliance disputes around what qualifies as adequate “tax documentation” and timeliness of claims (180‑day limit).
- Market effects: payment networks and issuers may seek alternate routing, fee structures, or surcharges; the bill attempts to block direct offsetting increases but enforcement could be complex.
If you want, I can:
- Produce a plain‑language one‑page brief for merchants or payment processors,
- Extract exact legislative text references and suggested implementation steps, or
- Compare this bill to similar statutes in other states or federal rules (e.g., Durbin Amendment‑era rules).
Compiled from official sources — confirm details with the bill’s official record.
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