Are Credit Card Processing Fees Taxable?

More businesses are adding credit card surcharges, convenience fees, swipe fees, or similar charges to offset processing costs. While these charges may feel separate from the product or service being sold, many states view them as part of the taxable sales price. That can lead to confusion for businesses that treat the surcharge as a pass-through amount and leave it out of the sales tax calculation. If the underlying sale is taxable, ignoring the fee in the sales price could result in under-collection and potential audit exposure.

This is a common pain point. Businesses try to recover rising merchant fees and then discover that many states fold these charges into the sales tax base. It feels counterintuitive, especially if the surcharge simply covers the cost of accepting a credit card.

Unfortunately, there is no “One Size Fits All” answer.

States vary in how they define things and how they apply taxes.  Below are excerpts from each state’s publication that are relevant to this topic. (source documents are linked at the end of the article).  If you want to learn more about this topic, the Brady Martz team is ready to assist.

Iowa

The basis for Iowa sales tax is the sales price of tangible personal property or taxable services.

• “Sales price also includes any charges by a seller for any services necessary to complete a sale.
  • This includes credit card processing or transaction fees on taxable sales

Minnesota

The sales price is the total of all charges that are part of the sale. If the item or service is taxable, these items are also taxable. Examples include:

• Taxes and fees that are the responsibility of the seller but are passed onto the customer (tariffs, credit card processing fees, environmental fees)

North Carolina

Surcharges made by a retailer for a retail sale, whether separately stated or not, are part of the sales price of an item subject to sales and use tax. (Examples: Fees for using a credit card, fuel surcharges, trip surcharges, service fees unless exempt under SUTB 32-18, etc.)

South Dakota

 A convenience fee or credit card fee charged by retailers or restaurants is to recoup the cost of the customer using a credit card. As a reminder these fees are part of the retailer’s gross receipts and are subject to sales tax.

Texas

Credit card processing fees are an expense incurred by a retailer in connection with the sale of taxable items. When a retailer separately states a charge to its customers to recover that expense, the separately stated charge is part of the sales price of the retailer’s taxable items.

Wisconsin

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

If you are planning to add a surcharge or want to check whether your current process is compliant, our team at Brady Martz can help you walk through the rules.

Sources

Iowa Department of Revenue. (n.d.). Sales, use, and excise tax guide. Iowa Department of Revenue. https://revenue.iowa.gov/taxes/tax-guidance/sales-use-excise-tax/sales-use-tax-guide

Minnesota Department of Revenue. (n.d.). Sales price. Minnesota Department of Revenue. https://www.revenue.state.mn.us/guide/sales-price

North Carolina Department of Revenue. (2026). North Carolina sales and use tax bulletins. https://www.ncdor.gov/sutb-2026pdf/open

South Dakota Department of Revenue. (2023). Fall 2023 newsletter. https://dor.sd.gov/media/0leotvz3/dor-newsletter-fall-2023.pdf

Texas Comptroller of Public Accounts. (2024, July). Tax Policy News. Texas Comptroller of

https://comptroller.texas.gov/taxes/tax-policy-news/2024-july.php

Wisconsin Department of Revenue. (2013, April). Wisconsin tax bulletin No. 179. https://www.revenue.wi.gov/WisconsinTaxBulletin/179.pdf