We have had some questions from our clients about sales tax and check out fees (surcharging) so we asked the WI Department of Revenue to weigh in on the issue. Here is their response to us:
If the product or service being sold is taxable and the retailer chooses to charge a “swipe” fee, sales or use tax applies to the total amount charged by the retailer for the product or service, which includes the amount being charged for the “swipe” fee.
Example: Individual purchases a new television for $599 at Retailer’s store. Individual pays using a credit card. Retailer charges Individual a 2% “swipe” fee on the $599 selling price. Retailer’s taxable receipts from the sale of the television are computed as follows:
Selling Price of television $599.00
“Swipe” fee charged by Retailer ($599 X .02) 11.98
Taxable Receipts $610.98
If the credit card is being used to pay for both taxable and nontaxable products or services, the retailer may allocate the “swipe” fee between the taxable and nontaxable purchases. In this case, the sales tax applies to the total amount charged for the taxable products or services, which includes the “swipe” fee charged on the taxable products or services.
Example: Individual goes to Grocery Store and purchases exempt food items in the amount of $65 and taxable items in the amount of $28. Individual pays using a credit card. Grocery Store charges Individual a 2% “swipe” fee on the $93 total selling price. Grocery Store’s taxable receipts are determined as follows:
Selling Price of taxable items $28.00
“Swipe” fee on taxable items ($28 X .02) .56
Taxable Receipts $28.56
Please let us know if we can be of further assistance.
Wisconsin Department of Revenue
Just a reminder, if you are thinking about charging your customers a check out fee or already do, Wind River Financial needs to be notified. Please contact your Relationship Manager immediately, so that we may assist you in fulfilling the necessary requirements.
To refresh your memory read our previous blogs about strategy and considerations as it relates to surcharging.
Are you noticing check out fees in your payment experiences?