SPEAKIN’ OUT NEWS
MONTGOMERY, Ala. — Alabama consumers and businesses face a new sales-tax rule for credit-card processing fees beginning Sept. 1.
Under Senate Bill 221, enacted as Act 2026-587, a credit-card transaction fee is no longer subject to state or local sales and use tax when the charge is separately identified on a customer’s receipt.
The Alabama Department of Revenue defines the transaction fee as an amount assessed on a debit- or credit-card purchase to help a merchant offset interchange or processing costs. It may also be described as a swipe fee, surcharge, processing fee, service charge or convenience fee.
The exemption does not eliminate the fee itself. Businesses may still charge customers a permitted processing fee; the change only determines whether sales tax is applied to that amount.
For example, if a customer makes a $100 taxable purchase and pays a separately listed $3 card fee, sales tax applies to the $100 purchase but not the $3 fee. If the receipt displays only a combined $103 charge without identifying the fee, tax applies to the full amount.
The distinction means businesses using surcharges should review their point-of-sale systems, invoices and receipt formats. Properly separating the processing charge will be necessary to receive the new tax treatment and ensure customers are not overcharged.
Supporters argued that sales tax should apply to the purchased product or service, not a banking-related expense. The Legislature’s fiscal analysis said the measure will reduce state, county and municipal tax collections by an undetermined amount beginning in fiscal year 2027.
Consumers should examine receipts carefully. Businesses with questions should consult Alabama Department of Revenue guidance or a qualified tax professional.