TAA 22A-006 Discounts
QUESTION 1: Is a credit card processing fee that is passed on to the customer when the customer pays by credit card subject to sales tax?
ANSWER: Yes. The credit card processing fee that is passed on to the customer as a part of the sales price of the meal is subject to sales tax.
March 24, 2022
Technical Assistance Advisement No. 22A-006
Sales and Use Tax – Discounts-Coupons, Rebates, Credits, Etc.
XXXXXXX (“Taxpayer”)
FEI No. XXXXXXX
BPN: XXXXXXX
Sections 212.02(15)(d) and 16, 212.05(1)(a), and 501.0117(1), Florida Statutes (“F.S.”)
Rule 12A- 1.0115(2)(a), Florida Administrative Code (“F.A.C.”)
Dear XXXXXXX:
This letter is a response to your petition on behalf of XXXXXXX, Technical Assistance Advisement ("TAA") with regard to the taxability of your client’s credit card processing fee. Your petition has been carefully examined and the Department finds it to be in compliance with the requisite criteria set forth in Chapter 12-11, Florida Administrative Code. This response to your request constitutes a TAA and is issued to you under the authority of s. 213.22, F.S.
Requested Advisement
Whether a credit card processing fee that is passed on to the customer when the customer pays by credit card is subject to sales tax.
Facts As Provided
Taxpayer’s representative writes that Taxpayer, a restaurant, is considering implementing a “Cash Discount Program” so as to give patrons an incentive for paying with cash as opposed to paying with credit cards. Upon speaking further with Taxpayer’s representative, this program has already been implemented in Taxpayer’s restaurant. The credit card processing company charges Taxpayer 3.5% of the sale on each credit card sale, which Taxpayer passes on to the customers as a “Non-Cash Adjustment.” All items on the menu are listed with the price if one pays cash and, if a customer pays with a credit card, a “Non-Cash Adjustment” of 3.5% is added to the bill. The credit card processing company the restaurant uses regards cash discounting as a “Non-Cash Adjustment” and not a surcharge. If a customer purchases an item on the menu advertised as costing $100 and chooses to pay with a credit card, an additional line is added to the bill for $3.50 (i.e., 3.5% of the menu item price) as a “Non-Cash Adjustment.” The total bill would then be $103.50 (without sales tax). All the money Taxpayer collects for the meals, including the 3.5% “Non-Cash Adjustment,” is remitted directly to the credit card processing company on a daily basis. The credit card processing company deducts its 3.5% for the credit card sales and returns the remaining money to Taxpayer a few days later.
There is a sign on the wall and a notice in the menu about the “Non-Cash Adjustment” policy. The sign contains language to this effect:
Price listed in-store and on advertisements reflects our cash price. Our regular price includes a 3.5% Non-Cash Adjustment. We offer savings at the point of sale when you pay with cash!
In small print, the sign states: The purpose of the non-cash adjustment is to incentivize customers to pay with cash. This is an “in-kind incentive” in compliance with section (2)(A) of the Durbin Amendment, a provision of United States Federal Law, 15 U.S.C. & 169o-2. We further provide a Cash Discount from the regular price in accordance with section (4)(c)(4) of the same document. . . .
In its materials about the program, the credit card processing company emphasizes that the service charge is not a surcharge. Taxpayer’s representative would like to know whether the “Non-Cash Adjustment” would be subject to sales tax.
Taxpayer’s Argument
Taxpayer’s representative does not have a position in this matter.
Applicable Law and Discussion
As an initial matter, it is noted that this TAA takes no position regarding the applicability or effect of the Durbin Amendment, referenced above.
It is further noted that subsection (1) of s. 501.0117, F.S., provides in pertinent part:
(1) A seller or lessor in a sales or lease transaction may not impose a surcharge on the buyer or lessee for electing to use a credit card in lieu of payment by cash, check, or similar means, if the seller or lessor accepts payment by credit card. A surcharge is any additional amount imposed at the time of a sale or lease transaction by the seller or lessor that increases the charge to the buyer or lessee for the privilege of using a credit card to make payment. . . . The term “credit card” includes those cards for which unpaid balances are payable on demand. This section does not apply to the offering of a discount for the purpose of inducing payment by cash, check, or other means not involving the use of a credit card, if the discount is offered to all prospective customers.
The Department of Revenue does not administer the provisions of ch. 501, F.S. Accordingly, this TAA takes no position regarding the applicability or effect of subsection 501.0117(1), F.S.
Section 212.05(1)(a), F.S., provides that every person that engages in the business of selling tangible personal property at retail in this state is exercising a taxable privilege. Sales of food and beverages in restaurants are subject to tax unless a specific exemption applies. See s. 212.02(15)(d), F.S.; Rule 12A1.0115(2)(a), F.A.C.
Under the specific facts presented and the hypothetical outlined above, Taxpayer will be charging one price to customers paying cash ($100.00) and a different price to customers paying by credit card ($103.50). The extra amount charged to those paying by credit ($3.50) represents the charge to Taxpayer by the credit card processing company for each transaction paid by a credit card.
“Sales price” is defined in pertinent part as:
. . . the total amount paid for tangible personal property, including any services that are a part of the sale, . . . and includes any amount for which credit is given to the purchaser by the seller, without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service cost, interest charged, losses, or any other expense whatsoever. . . .
See s. 212.02(16), F.S.
Section 212.02(16), F.S., clearly provides that an expense of the seller is part of the taxable “sales price” when passed along - here as the “Non-Cash Adjustment” - as a cost to the purchaser. Accordingly, under the hypothetical provided, the taxable “sales price” to customers paying cash would be $100.00, and the taxable “sales price” for customers paying by credit card would be $103.50.
Conclusion
Florida sales tax is due on the total sales price of meals paid by customers.
This response constitutes a Technical Assistance Advisement under section 213.22, F.S., which is binding on the Department only under the facts and circumstances described in the request for this advice as specified in section 213.22, F.S. Our response is predicated on those facts and the specific situation summarized above. You are advised that subsequent statutory or administrative rule changes, or judicial interpretations of the statutes or rules, upon which this advice is based, may subject similar future transactions to a different treatment than that expressed in this response. You are further advised that this response, your request and related backup documents are public records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions of section 213.22, F.S. Confidential information must be deleted before public disclosure. In an effort to protect confidentiality, we request you provide the undersigned with an edited copy of your request for Technical Assistance Advisement, the backup material, and this response, deleting names, addresses, and any other details which might lead to identification of the taxpayer. Your response should be received by the Department within 15 days of the date of this letter.
Alan R. Fulton
Revenue Program Administrator I
Technical Assistance & Dispute Resolution
