By HANK HAYES

NASHVILLE — Legislation that would prohibit payment card networks from charging so-called “swipe fees” on any state or local taxes has been rolled in the Tennessee General Assembly to 2022.

Swipe fees, also known as interchange fees, refer to the hidden cost paid by merchants to card-issuing banks and credit card companies for processing credit card and debit card sales.

“There is still risk involved with the electronic payment system we’ve got,” said state Rep. David Hawk, a Greeneville Republican and the bill’s sponsor.

“I understand that. It’s certainly a valid conversation to have. I think the way our retail community is now and really what it would take to hold them harmless in this particular situation with electronic fees. ...There’s a couple of states that have a 4% return in vendor’s compensation to our retail community. That may be something we look at.”

Food City President and CEO Steve Smith said of the fee in an email: “It’s a very unfair fee to pay on state sales tax collections — particularly for our struggling restaurants and hotels at this time.”

Four merchant groups contend retailers, restaurants and hotels are Tennessee’s No. 1 tax collector. They claim merchants collected $13 billion-plus in FY 2019-2020.

“It costs Tennessee businesses to serve the state as a tax collector — software, manpower, time (and penalties if you do it wrong),” they said in a position paper. “(There is) no compensation for collecting the state’s taxes.”

They also contend Tennessee’s merchants pay massive fees to the credit card companies for the privilege of collecting taxes for the state.

According to the group, 73% of point-of-sale transactions were paid with credit or debit cards in May, 2020 (up from 61% in 2019).

By applying swipe fees to the collection of Tennessee taxes, credit card companies took in an additional $175 million-plus in 2019-2020. “That’s on top of more than $2.4 billion in fees as a percentage of actual sales,” the group’s position paper also pointed out.

The legislation, the group noted, applies to collections of sales, liquor-by-the-drink, and local government hotel/motel taxes. It does not affect credit card companies’ ability to assess swipe fees on the actual sale of a good or service.

According to a 2018 Nilson Report, Visa and MasterCard accounted for 85% of credit and debit card purchases in the United States.

For more go to capitoltn.gov. The bill’s number is HB 0375.