HSB 324 (LSB 2103YC (3) 91)

HOUSE FILE _____ 

BY  (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON KAUFMANN)

A BILL FOR

An Act excluding interchange fees imposed upon certain taxes at points of sale.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  423H.1  Definitions.
   As used in this chapter, unless the context otherwise requires:
   1.  “Credit card” means a card, plate, coupon book, or other credit device existing for the purpose of obtaining money, property, labor, or services on credit.
   2.  “Debit card” means a card, or other payment code or device, issued or approved for use through a payment card network to debit an asset account, regardless of the purpose for which the account is established, whether authorization is based on signature, personal identification number, or other means. “Debit card” includes a general-use prepaid card, as defined in 15 U.S.C. §1693l-1. “Debit card” does not include paper checks.
   3.  “Electronic payment transaction” means a transaction in which a person uses a debit card, credit card, or other payment code or device, issued or approved through a payment card network to debit a deposit account or use a line of credit, whether authorization is based on a signature, personal identification number, or other means.
   4.  “Interchange fee” means a fee established, charged, or received by a payment card network for the purpose of compensating the issuer for its involvement in an electronic payment transaction.
   5.  “Issuer” means a person issuing a debit card or credit card, or the agent of such a person.
   6.  “Payment card network” means an entity that meets all of the following:
   a.  Directly, or through licensed members, processors, or agents, provide proprietary services, infrastructure, and software that routes information and data to conduct credit card or debit card transaction authorization, clearance, or settlement.
   b.  A seller uses, as a form of payment, a brand of credit card or debit card, or other device that may be used to carry out credit or debit transactions.
   7.  “Sale” includes leases or rentals.
   8.  “Seller” means any person making sales of items or services subject to tax.
   9.  “Settlement” means the transfer of funds from the account of a customer to a seller upon electronic submission of finalized sales transactions to the payment card network.
   10.  “Tax” means sales and use taxes under chapter 423, hotel and motel taxes under chapter 423A, local option taxes under chapter 423B, automobile rental taxes under chapter 423C, equipment taxes under chapter 423D, water service taxes under chapter 423G, excise taxes on fuel under sections 452A.3 and 452A.41, and cigarette and tobacco taxes under chapter 453A.
    Sec. 2.  NEW SECTION.  423H.2  Exclusion of interchange fee upon tax.
   The amount of tax calculated as a percentage of an electronic payment transaction amount and listed separately on the payment invoice or other demand for payment shall be excluded from the amount on which an interchange fee is charged for the electronic payment transaction.
    Sec. 3.  NEW SECTION.  423H.3  Payment card network requirements.
   1.  a.  A payment card network shall deduct the amount of any tax imposed from the calculation of an interchange fee specific to each form or type of electronic payment transaction at the time of settlement, or shall rebate the amount of an interchange fee proportionate to the amount attributable to the amount of tax.
   b.  A deduction or rebate must occur pursuant to this subsection at the time of settlement when the seller is able to capture and transmit the tax amount relevant to the sale at the time of sale as part of the transaction finalization.
   2.  If a seller is unable to capture and transmit tax or amounts relevant to the sale at the time of the sale, the payment card network shall accept proof of tax amounts collected on the sale subject to the interchange fee upon submission of the sales data by the seller and promptly credit the settlement account of the seller.
    Sec. 4.  NEW SECTION.  423H.4  Penalties.
   1.  A payment card network that violates this chapter is subject to a civil penalty in the amount of one thousand dollars per violation. Any moneys collected pursuant to this subsection shall be deposited into the general fund of the state.
   2.  In lieu of an action under subsection 1, a person may bring a private action to enforce this chapter, subject to the same penalties as provided under subsection 1, except any penalty amounts collected from the payment card network are recoverable by the person bringing the private action.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   Currently, a payment card network (credit or debit card) charges an interchange fee upon the entire electronic payment transaction amount, including the amount of any taxes charged. This bill excludes the amount of tax listed on the electronic payment transaction from the payment card network’s interchange fee assessed upon such a transaction.
   The bill defines “interchange fee” to mean a fee established, charged, or received by a payment card network for the purpose of compensating the issuer for its involvement in an electronic payment transaction.
   The bill defines “tax” to mean sales and use taxes under Code chapter 423, hotel and motel taxes under Code chapter 423A, local option taxes under Code chapter 423B, automobile taxes under Code chapter 423C, equipment taxes under Code chapter 423D, water service taxes under Code chapter 423G, excise taxes on fuel under Code sections 452A.3 and 452A.41, and cigarette and tobacco taxes under Code chapter 453A.
   The bill requires the payment card network to deduct the amount of any tax imposed from the calculation of an interchange fee specific to each form or type of electronic payment transaction at the time of settlement, or requires the payment card network to rebate the amount of an interchange fee proportionate to the amount attributable to the amount of tax.
   If a seller is unable to capture and transmit tax or amounts relevant to the sale at the time of the sale, the bill requires the payment card network to promptly credit the settlement account of the seller, upon sufficient proof.
   A payment card network that violates the bill is subject to a civil penalty in the amount of $1,000 per violation. Any moneys collected for violations of the bill shall be deposited into the general fund of the state. In lieu of the civil penalty, a person may enforce the bill through a private action, and any penalty amounts are recoverable by the person bringing the private action.