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H 7607Rights & Warranties

Commercial Law - General Regulatory Provisions - Swipe Fees

This bill prevents credit card companies from charging merchants processing fees on sales tax and tip amounts.

Held for study
Population
Affected
35
Email Legislator
Introduced Feb 11, 2026Committee House Corporations

Plain-English Summary

This legislation prohibits credit card networks and banks from charging merchants "swipe fees" (processing fees) on the sales tax and gratuity portions of a transaction. Currently, merchants often pay these percentage-based fees on the total bill, including taxes collected for the state and tips left for workers. Under this bill, payment networks must either deduct the tax and tip amounts from the fee calculation at the time of sale or provide a rebate to the merchant later. The bill also forbids card networks from raising other fees to make up for this lost revenue.

For younger readers

When you buy something at a store using a credit card, the store has to pay a small fee to the credit card company to process the payment. Right now, the store pays that fee on the total price, including the extra tax money that goes to the government and any tip left for a worker. This new rule says the store should not have to pay a fee on the tax money or the tip money. This helps the store and the workers keep a little more money from every sale.

Who & Where It Applies

Impacted groups
MerchantsRestaurant OwnersCredit Card NetworksService Industry WorkersBanks
Impacted communities
All

Constitutional & Fiscal Check

The provision making it unlawful for payment networks to alter other fees to "circumvent" the act could face challenges under the Commerce Clause or the Contracts Clause. Opponents may argue that the state is unconstitutionally burdening interstate commerce or interfering with private pricing contracts by dictating how a national financial network structures its global fee recovery models.

Estimated cost
None
Estimated revenue
Amount unknown

Bill Analysis

Both viewpoints
For Progressives
  • Protects the earnings of service industry workers by ensuring that corporate processing fees are not levied against gratuities, theoretically preserving more value for the employee.
  • Supports local small businesses by reducing the extraction of wealth by large, out-of-state financial institutions, allowing more revenue to circulate within the local community.
  • Promotes fairness by preventing corporations from profiting off public funds (sales tax) that merchants are legally required to collect for the government.
  • Credit card companies may retaliate by cutting consumer rewards programs or raising interest rates, which could disproportionately hurt lower-income individuals who rely on credit.
  • The technical requirement to separate tax and tip data for rebates could create a complex administrative burden for small, family-owned businesses lacking modern point-of-sale technology.
  • While helpful to merchants, the bill does not address the broader systemic issue of predatory interest rates and high banking fees charged to consumers.
For Conservatives
  • Protects business owners from being forced to pay fees on taxes they are merely collecting as unpaid agents of the government, restoring a sense of fairness to tax collection.
  • Increases the profit margins of private businesses by reducing operational overhead costs without requiring government subsidies or taxpayer funding.
  • Asserts the rights of local merchants against the monopolistic pricing power of large payment card networks.
  • Represents significant government interference in the free market by dictating price structures and prohibiting private companies from setting their own service fees.
  • Violates the sanctity of private contracts between merchants and financial institutions, setting a precedent for the state to rewrite business agreements.
  • Creates a cumbersome regulatory framework that will likely result in higher compliance costs for financial institutions, which will eventually be passed down to consumers.

Votes

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Full Bill Text

Changes to existing Rhode Island law · 64 additions

SECTION 1. Title 6 of the General Laws entitled "COMMERCIAL LAW — GENERAL REGULATORY PROVISIONS" is hereby amended by adding thereto the following chapter: 6-26.2-1. Definitions. As used in this chapter, the following terms shall have the following meanings:

(1) "Assessment fee" means a fee paid to the payment card network for allowing a merchant to use a payment card or other payment code or device in an electronic payment transaction.

(2) "Electronic payment transaction" means a transaction in which a person uses a payment 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.

(3) "Gratuity" means a voluntary monetary contribution to an agent of a merchant from a guest, patron, or customer in connection with services rendered.

(4) "Interchange fee" means a fee charged to a merchant for the purpose of compensating the payment card issuer for the issuer’s involvement in an electronic payment transaction.

(5) "Payment card" means a credit card, debit card, check card, or other card that is issued to an authorized user to purchase or obtain goods, services, money, or any other thing of value.

(6) "Payment card issuer" means a lender, including a financial institution, or a merchant that receives applications and issues payment cards to individuals.

(7) "Payment card network" means an entity that directly, or through a licensed member, processor, or agent, provides the proprietary services, infrastructure, and software that route information and data to conduct debit card or credit card transaction authorization, clearance, and settlement and that an entity uses in order to accept as a form of payment a brand of debit card, credit card, or other device that may be used to carry out debit or credit transactions.

(8) "State or local tax" means any sales, use, occupancy, or excise tax imposed by the state or a political subdivision thereof.

(9) "Swipe fee" means the interchange fee and, if applicable, the assessment fee. 6-26.2-2. Exclusion of state or local taxes and gratuity from swipe fees -- Merchant deduction or rebate.

(a) The amount of state or local tax that is calculated as a percentage of the amount of an electronic payment transaction made in this state and gratuity that is listed separately on a payment invoice or other demand for payment shall be excluded from the total amount on which a swipe fee is charged for that transaction.

(b) A payment card network shall, with respect to each form or type of electronic payment transaction:

(1) Deduct the amount of state or local tax imposed and gratuity from the calculation of swipe fees attributable to the transaction at the time of settlement; or

(2) Rebate the merchant an amount equal to the amount of swipe fees attributable to the state or local tax imposed and gratuity on the transaction.

(c) A deduction or rebate under this section shall occur at the time of settlement when the merchant is able to capture and transmit state or local tax or fee amounts and gratuity relevant to the sale at the time of sale as part of the transaction finalization. If a merchant is unable to capture and transmit tax or fee and gratuity amounts relevant to the sale at the time of sale, then the payment card network shall accept proof of tax or fee amounts and gratuity collected on sales subject to a swipe fee on the submission of sales data by the merchant and provide the rebate no later than one hundred eighty (180) days after the date of the electronic payment transaction, and, within thirty

(30) days after the merchant submits the sales data.

(d) This section shall not create liability for a payment card network regarding the accuracy of the tax or gratuity data reported by the merchant.

(e) It shall be unlawful for a payment card issuer or a payment card network to alter or manipulate the computation and imposition of swipe fees by increasing the rate or amount of the fees applicable to or imposed upon the portion of an electronic payment transaction not attributable to taxes or gratuities to circumvent the effect of this section. 6-26.2-3. Penalties.

(a) A person who violates this chapter shall be subject to a civil penalty not to exceed one thousand dollars ($1,000) for each violation.

(b) The attorney general:

(1) May bring an action to recover the civil penalty imposed under this section;

(2) May obtain a temporary or permanent injunction to restrain the violation; and

(3) Shall deposit a civil penalty collected under this section in the state treasury to the credit of the general revenue fund.

(c) A person who violates this chapter shall refund a merchant any swipe fees charged in violation of this chapter. 6-26.2-4. Severability. If any of the provisions of this chapter are held invalid, the remainder shall not be affected as a result; nor shall the application of the provision held invalid to persons or circumstances other than those as to which it is held invalid be affected as a result.

SECTION 2. This act shall take effect on January 1, 2027.