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S 2344Sales & Use

Commercial Law - General Regulatory Provisions - Interchange Fees

This bill prohibits credit card processors from charging interchange fees on the sales tax and gratuity portions of electronic transactions.

Held for study
Population
Affected
35
Email Legislator
Introduced Jan 30, 2026Committee Senate Commerce

Plain-English Summary

This legislation prevents credit card companies, banks, and payment processors from charging merchants "interchange fees" (often called swipe fees) on the sales tax and tip portions of a transaction. Currently, merchants pay these fees on the total bill amount. Under this bill, if a merchant provides data separating the tax and tip from the sale price, the fees can only be applied to the sale price. If the data isn't sent immediately, the merchant can submit proof later to get a refund. It also prohibits banks 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 bank for accepting that card. Right now, the store pays that fee on the total amount of money you pay, including the sales tax and any tip you leave for a worker. This bill says that banks are not allowed to charge that fee on the tax money or the tip money. They can only charge the fee on the price of the item itself. This helps stores keep a little more money from each sale.

Who & Where It Applies

Impacted groups
MerchantsCredit Card IssuersBanksRestaurant OwnersService Industry Workers
Impacted communities
All

Constitutional & Fiscal Check

Moderate risk

There is a moderate risk regarding the Supremacy Clause and the Commerce Clause. Payment card networks operate across state lines, and federal law (such as the Durbin Amendment) regulates interchange fees. Opponents may argue this state law is preempted by federal banking regulations or places an undue burden on interstate commerce. However, it does not directly infringe on individual civil liberties like free speech or due process.

Estimated cost
None
Estimated revenue
Amount unknown

Bill Analysis

Both viewpoints
For Progressives
  • Protects the earnings of service industry workers by removing fees on gratuities, potentially encouraging employers to facilitate credit card tipping without financial penalty.
  • Supports small local businesses by reducing their operating costs and preventing large financial institutions from extracting profit from mandatory government tax collections.
  • Checks corporate power by prohibiting credit card networks from manipulating other fee structures to circumvent the law, ensuring genuine relief for merchants against banking oligopolies.
  • Places an administrative burden on small business owners who may lack the sophisticated point-of-sale technology required to separate tax and gratuity data automatically.
  • Prioritizes relief for business owners and corporations over direct financial assistance to low-income consumers or wage increases for workers.
  • Could lead credit card issuers to reduce consumer rewards programs or tighten credit availability for lower-income individuals to offset the loss of revenue from these fees.
For Conservatives
  • Reduces the financial burden on business owners by eliminating fees charged on government-mandated tax collections, allowing private businesses to retain more of their revenue.
  • Strengthens the local economy by keeping capital within the state’s businesses rather than sending it to out-of-state financial institutions and global credit card networks.
  • Prevents financial institutions from profiting off of voluntary gratuities, protecting the private property rights of business owners and the income of their employees.
  • Violates free market principles by having the government dictate the terms of private contracts and fee structures between financial institutions and merchants.
  • Imposes heavy-handed government regulations and excessive penalties of $1,000 per transaction, creating a hostile regulatory environment for financial service providers.
  • Interferes with the operational freedom of businesses by mandating specific data transmission methods or documentation processes to avoid fees.

Votes

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Full Bill Text

Changes to existing Rhode Island law · 84 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.

(a) As used in this chapter. the following words and terms shall have the following meanings:

(1) "Acquirer bank" means a member of a payment card network that contracts with a merchant for the settlement of electronic payment transactions. An acquirer bank may contract directly with merchants or indirectly through a processor to process electronic payment transactions.

(2) "Authorization" means the process through which a merchant requests approval for an electronic payment transaction from the issuer.

(3) "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.

(4) "Credit card" means a card, plate, coupon book, or other credit device existing for the purpose of obtaining money, property, labor, or services on credit.

(5) "Debit card" means a card or other payment code or device issued or approved for use through a payment card network to debit an asset account, regardless of the purpose for which the account is established, whether authorization is based on a signature, a personal identification number, or other means. "Debit card" includes a general use prepaid card, as defined in 15 U.S.C. § 16931-I. "Debit card" does not include paper checks.

(6) "Electronic payment transaction" means a transaction in which a person uses a debit card, a 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, a personal identification number or other means.

(7) "Gratuity" means a voluntary monetary contribution to an employee from a guest, patron, or customer in connection with services rendered.

(8) "Interchange fee" means a fee established, charged, or received by a payment card network for the purpose of compensating the issuer for its involvement in an electronic payment transaction.

(9) "Issuer" means a person issuing a debit card or credit card or the issuer's agent.

(10) "Merchant" means a person that collects and remits a tax.

(11) "Payment card network" means an entity that:

(i) Directly or through licensed members, processors, or agents, provides the proprietary services, infrastructure, and software to route information and data for the purpose of conducting electronic payment transaction authorization clearance and settlement; and

(ii) A merchant uses to accept as a form of payment a brand of debit card, credit card, or other device that may be used to carry out electronic payment transactions.

(12) "Person" means any individual, firm, public or private corporation, government, partnership, association, or any other organization or entity.

(13) "Processor" means an entity that facilitates, services, processes, or manages the debit or credit authorization, billing, payment procedures, or settlement with respect to any electronic payment transaction.

(14) "Settlement" means the process of transmitting sales information to the issuing bank for collection and reimbursement of funds to the merchant and calculating and reporting the net transaction amount to the issuer and merchant for an electronic payment transaction that is cleared.

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

(16) "Tax and gratuity documentation" means documentation sufficient or data sufficient for the payment card network to determine the total amount of the electronic payment transaction and the tax or gratuity amount of the transaction. It may be related to a single electronic payment transaction or multiple electronic payment transactions aggregated over a period of time to include, but are not limited to, invoices, receipts, journals, ledgers, and tax returns filed with the department of revenue or local taxing authority. 6-26.2-2. Interchange fees on taxes and gratuities prohibited.

(a) An issuer, a payment card network, an acquirer bank, or a processor shall not receive or charge a merchant any interchange fee on the tax amount or gratuity of an electronic payment transaction if a merchant informs the acquirer bank or its designee of the tax or gratuity amount as part of the authorization or settlement process for the electronic payment transaction. The merchant shall transmit the tax or gratuity amount data as part of the authorization or settlement process to avoid being charged interchange fees on the tax or gratuity amount of an electronic payment transaction.

(b) A merchant that does not transmit the tax or gratuity amount data in accordance with this section may submit tax and gratuity documentation for the electronic payment transaction to the acquirer bank or its designee 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 necessary tax and gratuity documentation, the issuer or a payment card network shall credit to the merchant the amount of interchange fees charged on the tax or gratuity amount of the electronic payment transaction.

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

(d) It shall be unlawful for an issuer, a payment card network, an acquirer bank, or a processor to 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 taxes or gratuities to circumvent the provisions of this section. 6-26.2-3. Penalties. An issuer, a payment card network, an acquirer bank, a processor, or other designated entity that has received the tax or amount data and violates the provisions of this chapter shall be subject to a civil penalty of one thousand dollars ($1,000) per electronic payment transaction conducted in violation of this chapter, and the issuer or payment card network shall refund the merchant the interchange fee calculated on the tax or gratuity amount relative to the electronic payment transaction. 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.