AB 1065: Credit card transaction fees: tax payments: Consumer Inflation Reduction and Tax Fairness Act.

100050.

This division shall be known, and may be cited, as the Consumer Inflation Reduction and Tax Fairness Act.

100052.

For purposes of this division:

(a) “Acquirer bank” means a member of a payment card network that contracts with a merchant for the settlement of electronic payment transactions. An acquirer bank may contract directly with merchants or indirectly through a processor to process electronic payment transactions.

(b) “Authorization” means the process through which a merchant requests approval for an electronic payment transaction from the issuer.

(c) “Clearance” means the process of transmitting final transaction data from a merchant to an issuer for posting to the cardholder’s account and the calculation of fees and charges, including interchange fees, that apply to the issuer and the merchant.

(d) “Credit card” has the same meaning as defined in Section 1747.02 of the Civil Code.

(e) (1) “Debit card” has the same meaning as defined in Section 1748.30 of the Civil Code.

(2) For purposes of this division, “debit card” includes a general use prepaid card, as that term is defined in Section 1693l-1 of Title 15 of the United States Code.

(3) “Debit card” shall not include paper checks.

(f) “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.

(g) “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.

(h) “Issuer” means a person issuing a debit card or credit card, or the issuer’s agent.

(i) “Merchant” means a person that collects and remits a tax.

(j) “Payment card network” means an entity that satisfies both of the following:

(1) Directly, or through licensed members, processors, or agents, provides the proprietary services, infrastructure, and software that routes information and data to conduct debit card or credit card transaction authorization, clearance, and settlement.

(2) Is used by a merchant or seller in order to accept as a form of payment a brand of debit card, credit card, or other device that may be used to carry out debit or credit transactions.

(k) “Person” means any individual, firm, public or private corporation, government, partnership, association, or any other organization or entity.

(l) “Processor” means an entity that facilitates, services, processes, or manages the debit or credit authorization, billing, transfer, payment procedures, or settlement with respect to any electronic payment transaction.

(m) “Settlement” means the process of transmitting sales information to the issuing bank for collection and reimbursement of funds to the merchant and calculating and reporting the net transaction amount to the issuer and merchant for an electronic payment transaction that is cleared.

(n) “Tax” means any state or local tax or fee that is calculated based on an electronic payment transaction amount and is listed separately on the payment invoice or other demand for payment. “Tax” includes the following:

(1) Sales and Use Tax Law (Part 1 (commencing with Section 6001) of Division 2 of the Revenue and Taxation Code).

(2) Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200) of Division 2 of the Revenue and Taxation Code).

(3) Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251) of Division 2 of the Revenue and Taxation Code).

(4) Cigarette and Tobacco Products Tax Law (Part 13 (commencing with Section 30001) of Division 2 of the Revenue and Taxation Code).

(5) Alcoholic Beverage Tax Law (Part 14 (commencing with Section 32001) of Division 2 of the Revenue and Taxation Code).

(6) Cannabis Tax Law (Part 14.5 (commencing with Section 34010) of Division 2 of the Revenue and Taxation Code).

(o) “Tax documentation” means documentation sufficient for the payment card network to determine the total amount of the electronic payment transaction and the tax amount of the transaction. Tax documentation may be related to a single electronic payment transaction or multiple electronic payment transactions aggregated over a period of time. Examples of tax documentation include, but are not limited to, invoices, receipts, journals, ledgers, and tax returns filed with the Internal Revenue Service, the California Department of Tax and Fee Administration, or any other state or local taxing authority.

100054.

(a) An issuer, a payment card network, an acquirer bank, or a processor shall not receive or charge a merchant any interchange fee on the tax amount of an electronic payment transaction if the merchant informs the acquirer bank or its designee of the tax amount as part of the authorization or settlement process for the electronic payment transaction. The merchant shall transmit the tax amount data as part of the authorization or settlement process to avoid being charged interchange fees on the tax amount of an electronic payment transaction.

(b) A merchant that does not transmit the tax amount data in accordance with this section may submit tax documentation for the electronic payment transaction to the acquirer bank or its designee no later than 180 days after the date of the electronic payment transaction, and the issuer shall credit to the merchant the amount of interchange fees charged on the tax amount of the electronic payment transaction within 30 days after the merchant submits any necessary tax documentation.

(c) This section does not create liability for a payment card network regarding the accuracy of the tax data reported by the merchant.

(d) A payment card network, an acquirer bank, or a processor shall not alter or manipulate the computation and imposition of interchange fees by increasing the rate or amount of the fees applicable to or imposed upon the portion of a credit card or debit card transaction not attributable to taxes or other fees charged to the retailer to circumvent the effects of this section.

100056.

(a) A person or entity that knowingly engages in a pattern or practice of assessing interchange fees on the tax portion of an electronic payment transaction in violation of this division may be subject to enforcement under Chapter 5 (commencing with Section 17200) of Part 2 of Division 7 of the Business and Professions Code.

(b) In determining liability under this section, the court shall consider all of the following:

(1) Whether the person or entity had control over or access to the tax amount data.

(2) Whether the person or entity took reasonable steps to implement and enforce compliant processes for authorization, settlement, and fee computation.

(3) Whether any violation was the result of merchant or point-of-sale vendor error, or a failure to transmit sufficient or accurate tax data.

(c) Nothing in this section shall impose liability on a payment card network, acquirer bank, issuer, or processor for any errors, omissions, or misstatements in tax data provided by a merchant or its point-of-sale vendor, provided the entity did not knowingly disregard reliable information regarding such errors.