Newly proposed legislation in the Pennsylvania House of Representatives aims to prohibit financial institutions from collecting fees on the sales tax portion of credit and debit card transactions. Critics, including banks and electronic payment companies, argue that it would increase burdens on small businesses without guaranteeing consumer savings. Proponents, led by retailers and merchants, contend that it restores fairness to the state’s tax system and alleviates financial strain on small businesses.
House Bill 2394 passed the finance committee last week with a party-line vote of 14-11, all Democrats voting in favor. It may be up for a full chamber vote next week. The bill seeks to stop swipe fees from applying to the sales and use tax portion of transactions. "Merchants are merely performing their state-mandated duty to collect and remit taxes and should not have to pay an additional cost to do so," said Reps. Greg Scott (D-Montgomery) and Steve Samuelson (D-Northampton).
Scott and Samuelson cited data from the Merchants Payments Coalition indicating that swipe fees are merchants' highest operating cost after labor, driving up family expenses by nearly $1,000 annually.
A coalition of bank and credit union advocates argues that the legislation is a $147 million "giveaway" to big retailers, with financial institutions, customers, and small businesses bearing the costs based on fiscal year 2025 state sales tax estimates. Kevin Shivers, CEO of the Pennsylvania Association of Community Bankers, stated: "What we’re really trying to do right now... is explain that this is a cost of a system."
Shivers explained that interchange fees cover costs related to managing electronic payment systems and transaction processes. He noted many small retailers lack modern card readers due to high equipment costs: "So you’re looking at significant costs for the average small business [and] it’s going to be five or six years before they finally are able to pay for the cost of that new system."
Retailers argue interchange fees have surged over the past decade. Scott and Samuelson noted these fees more than doubled nationwide over ten years to $137.8 billion. Shivers acknowledged this but attributed it to increased electronic payments.
Shivers contended larger retailers save money through self-checkout options while aiming for all-electronic payments due to significant savings. He referenced Congress's Durbin Amendment under Dodd-Frank as evidence against passing savings onto consumers: “We think there is evidence that should pose a cautionary tale for policymakers; they’re simply not going to [pass along savings].”
Similar legislation has been introduced in over a dozen states; Illinois recently adopted such measures under Gov. J.B. Pritzker.
If passed by Pennsylvania's House, Senate approval would follow before reaching Gov. Josh Shapiro's desk.