(Source: MIRS.news, Published 05/23/2024) Michigan businesses are expected to pay sales taxes off the value of their credit card surcharges that come with their customers' purchases, according to an article published in the Department of Treasury's newsletter this month.
The decision follows a Michigan Retailers Association question on the matter and is consistent with several other states with similar laws on the book, according to Department of Treasury spokesperson Ron Leix.
“Sellers employing credit-card surcharges on purchasers should make sure that they remit tax on the surcharges,” the article reads.
However, business groups see government nickel and diming their members for an expense that's become a standard part of doing business in 2024. The Michigan Chamber of Commerce is reporting a “flurry of inquires from its members and businesses across the state.”
The Chamber's director of legislative affairs, Leah Robinson, said they have “serious concerns about its potential impact and legality" as they explore next steps.
Over at the Small Business Association of Michigan (SBAM), President Brian Calley said, “I'm not challenging Treasury's technical analysis, but it feels like everybody wants a piece of small business owners, and they're the last ones to benefit from the business they created.”
When a business allows customers to use their credit card to pay for a service or product, the business pays between 2 and 4 percent to Visa or Mastercard. Many view this expense as the cost of doing business. To counteract this, some businesses have begun adding another $1 or $2 to a customers' bill if they are paying by credit card.
Treasury officials are saying this added cost is subject to sales tax because state law doesn't create a clear line preventing it. The service cost is added to the final bill and Treasury officials are saying since the law doesn't prevent the purchases from being taxed, they will be.
“One of the highest costs retailers face is credit card processing fees,” said Amy Drumm of the Michigan Retailers Association, who said while she understands where Treasury is coming from, her organization will be exploring legislative sponsors to sponsor a bill exempting an expense that can be significant over a few years.
“This would simplify retail transactions and allow them to fully recoup the processing costs if they choose to do so,” Drumm said.
