Can a Texas store or restaurant add a disclosed service fee to my purchase?

Plain-English summary

A state representative asked the Attorney General whether Texas law lets a private retail business, like a fast food restaurant, tack an itemized, disclosed "service fee" onto a customer's purchase. The example in the request was concrete: a flat 37-cent fee printed on the receipt as "Svc Fee," with a sign on the customer's side of the register reading "37¢ Service Fee on all Sales over $10."

The opinion concluded the answer was yes, with two limits. First, the fee could not be aimed only at customers who pay with a credit card. A provision of the Finance Code bars a "surcharge on a buyer who uses a credit card" instead of cash or a check, so a credit-card-only version of this fee would be a problem. The representative's example was not limited to credit-card users. Beyond that, the opinion found no statute or constitutional provision (and the requestor pointed to none) that forbids a disclosed, itemized service fee on ordinary consumer transactions. The opinion grounded the result in the broad freedom of contract that the Texas Supreme Court has recognized in Texas law.

Second, the opinion flagged a contract-formation point. If a business does not itemize and disclose the fee to the customer before the transaction, the customer may not be contractually bound to pay it, because both sides have to assent to the same terms. The opinion expressly did not address whether sales tax has to be collected on the service fee.

Currency note

This opinion was issued in 2012. Subsequent statutory amendments, court decisions, or later Attorney General opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant for those who asked

The requesting legislator (as the opinion described it): The opinion answered that Texas law did not prohibit a disclosed, itemized retail service fee on a consumer transaction, subject to the credit-card-surcharge limit and the disclosure caveat.

Retail businesses (as the opinion described it): The opinion treated such a fee as permissible if it applies regardless of payment method and is itemized and disclosed in advance; it did not bless a fee aimed only at credit-card payers or one sprung on the customer after the fact.

Consumers (as the opinion described it): The opinion observed that a customer who is not told about the fee before the transaction may not be contractually bound to pay it.

Common questions

Can a Texas store or restaurant charge a service fee on top of the price?
According to the opinion, yes. No Texas statute or constitutional provision prohibits a private retailer from charging an itemized, disclosed service fee on a consumer transaction, as long as it is not limited to credit-card users.

Is a credit-card-only service fee allowed?
The opinion pointed to a Finance Code provision barring a surcharge on buyers who use a credit card, so a fee limited to credit-card payments would conflict with that ban. The fee in the example was not so limited.

What if I was never told about the fee?
The opinion said that if the fee is not itemized and disclosed before the transaction, the consumer may not be contractually bound to pay it, because a binding contract needs mutual assent to the same terms.

Does the opinion say anything about sales tax on the fee?
No. The opinion expressly declined to consider whether state and local sales taxes must be collected on the service fee.

Background and statutory framework

The Finance Code prohibits imposing a "surcharge on a buyer who uses a credit card for an extension of credit instead of cash, a check, or a similar means of payment." Tex. Fin. Code Ann. § 339.001(a) (West 2006). The opinion found no statute or constitutional provision prohibiting a disclosed, itemized service fee that is not limited to credit-card use.

For the freedom-of-contract point, the opinion cited NAFTA Traders, Inc. v. Quinn. For the rule that an undisclosed fee may not bind the consumer, it cited Effel v. McGarry on mutual assent and Fort Worth Indep. Sch. Dist. v. City of Fort Worth on the need for sufficiently definite contract terms.

Citations

Cases:

• NAFTA Traders, Inc. v. Quinn, 339 S.W.3d 84, 95 (Tex. 2011)
• Effel v. McGarry, 339 S.W.3d 789, 792 (Tex. App.-Dallas 2011, pet. denied)
• Fort Worth Indep. Sch. Dist. v. City of Fort Worth, 22 S.W.3d 831, 846 (Tex. 2000)

Statutes:

• Tex. Fin. Code Ann. § 339.001(a) (West 2006)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0951
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2012/ga0951.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT

June 18, 2012

The Honorable Jim Jackson Opinion No. GA-0951
Chair, Committee on Judiciary and
Civil Jurisprudence Re: Whether a private retail establishment may
Texas House of Representatives charge an itemized and disclosed "service fee" on
Post Office Box 2910 a consumer transaction (RQ-1036-GA)
Austin, Texas 78768-2910

Dear Representative Jackson:

You ask whether Texas law permits a private retail establishment, such as a fast food restaurant, to charge an itemized and disclosed "service fee" in connection with a consumer purchase.[1] You provide an example in which the fee, in a fixed amount of 37 cents, is printed on the customer's receipt as "Svc Fee," and a sign placed on the consumer's side of the cash register states the following: "37¢ Service Fee on all Sales over $10." Request Letter at 1.

A provision of the Finance Code prohibits the imposition of a "surcharge on a buyer who uses a credit card for an extension of credit instead of cash, a check, or a similar means of payment." TEX. FIN. CODE ANN. § 339.001(a) (West 2006). You do not suggest that the service fee at issue is limited to consumers who pay with a credit card. In addition, you do not point us to any provision of statutory or constitutional law that would prohibit the imposition of an itemized and disclosed service fee on consumer transactions by a private retail establishment, nor have we found any such prohibition. Moreover, the Texas Supreme Court has recognized, "[a]s a fundamental matter, [that] Texas law recognizes and protects a broad freedom of contract." NAFTA Traders, Inc. v. Quinn, 339 S.W.3d 84, 95 (Tex. 2011). If, however, a service fee is not itemized and disclosed to the consumer in advance of the transaction, the consumer may not be contractually bound to pay the fee. See Effel v. McGarry, 339 S.W.3d 789, 792 (Tex. App.-Dallas 2011, pet. denied) (stating that parties to a contract "must assent to the same thing in the same sense at the same time"; their "assent must comprehend the whole proposition"; and "the agreement must comprise all the terms which they intend to introduce into it"). See also Fort Worth Indep. Sch. Dist. v. City of Fort Worth, 22 S.W.3d 831, 846 (Tex. 2000) (providing that "a contract is legally binding only if its terms are sufficiently definite to enable a court to understand the parties' obligations").

We conclude that no statute or constitutional provision prohibits a private retail establishment in Texas from charging an itemized and disclosed "service fee" on a consumer transaction, provided that the fee is not limited to the use of a credit card. If, however, the fee is not itemized and disclosed to the consumer in advance of the transaction, the consumer may not be contractually bound to pay it.[2]

SUMMARY

No statute or constitutional provision prohibits a private retail establishment in Texas from charging an itemized and disclosed "service fee" on a consumer transaction, provided that the fee is not limited to the use of a credit card. If, however, the fee is not itemized and disclosed to the consumer in advance of the transaction, the consumer may not be contractually bound to pay it.

Very truly yours,

DANIEL T. HODGE
First Assistant Attorney General

JAMES D. BLACKLOCK
Deputy Attorney General for Legal Counsel

JASON BOATRIGHT
Chair, Opinion Committee

Rick Gilpin
Assistant Attorney General, Opinion Committee

[1] Letter from Honorable Jim Jackson, Chair, House Comm. on Judiciary & Civil Jurisprudence, to Honorable Greg Abbott, Tex. Att'y Gen. (Jan. 10, 2012), http://www.texasattorneygeneral.gov/opin ("Request Letter").

[2] You do not ask, and we do not consider, whether state and local sales taxes must be collected on the "service fee."