Was a restaurant's 3.5% non-cash adjustment for customers paying by credit card included in the taxable sales price of meals?

Plain-English summary

Florida held that a restaurant's 3.5% non-cash adjustment for credit-card payments was subject to sales tax.

The restaurant displayed cash menu prices and added 3.5% when a customer paid by credit card. The charge reimbursed the restaurant for the processing company's fee. Fla. Stat. Sec. 212.02(16) includes seller expenses passed to the purchaser in the taxable sales price, so the adjustment could not be deducted from the tax base.

In the ruling's example, a meal advertised at $100 had a $100 taxable sales price when paid in cash and a $103.50 taxable sales price when paid by credit card.

The Department expressly took no position on the federal Durbin Amendment or Fla. Stat. Sec. 501.0117 because it did not administer those rules. The TAA decided only the Florida sales-tax treatment.

What this means for you

Restaurants

Calling a card fee a “non-cash adjustment” or structuring it as a cash-discount program did not remove the amount from the taxable meal price.

Point-of-sale providers and accountants

Sales tax had to be calculated on the full amount charged to the card-paying customer, including the passed-through processing cost.

Common questions

Was the credit-card adjustment taxable? Yes.

Did the label used for the fee change the result? No. The Department treated it as a seller expense included in sales price.

Did the TAA approve the charge under credit-card surcharge law? No. It expressly took no position on that issue.

Citations and references

• Fla. Stat. Sec. 212.02(16)
• Fla. Stat. Sec. 212.02(15)(d)
• Fla. Stat. Sec. 212.05(1)(a)
• Fla. Admin. Code R. 12A-1.0115(2)(a)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 22A-006

Original ruling text

QUESTION 1: Is a credit card processing fee that is passed on to the customer when the customer
pays by credit card subject to sales tax?
ANSWER: Yes. The credit card processing fee that is passed on to the customer as a part of the sales
price of the meal is subject to sales tax.

March 24, 2022

XXXXXXX
XXXXXXX
XXXXXXX
XXXXXXX
XXXXXXX
Re:

Technical Assistance Advisement No. 22A-006
Sales and Use Tax – Discounts-Coupons, Rebates, Credits, Etc.
XXXXXXX (“Taxpayer”)
FEI No. XXXXXXX
BPN: XXXXXXX
Sections 212.02(15)(d) and 16, 212.05(1)(a), and 501.0117(1), Florida Statutes (“F.S.”)
Rule 12A- 1.0115(2)(a), Florida Administrative Code (“F.A.C.”)

Dear XXXXXXX:
This letter is a response to your petition on behalf of XXXXXXX, Technical Assistance Advisement ("TAA")
with regard to the taxability of your client’s credit card processing fee. Your petition has been carefully
examined and the Department finds it to be in compliance with the requisite criteria set forth in Chapter
12-11, Florida Administrative Code. This response to your request constitutes a TAA and is issued to you
under the authority of s. 213.22, F.S.

Requested Advisement
Whether a credit card processing fee that is passed on to the customer when the customer pays by credit
card is subject to sales tax.

XXXXXXX
March 24, 2022
Florida Department of Revenue
Page 2

Facts As Provided
Taxpayer’s representative writes that Taxpayer, a restaurant, is considering implementing a “Cash
Discount Program” so as to give patrons an incentive for paying with cash as opposed to paying with credit
cards. Upon speaking further with Taxpayer’s representative, this program has already been
implemented in Taxpayer’s restaurant. The credit card processing company charges Taxpayer 3.5% of the
sale on each credit card sale, which Taxpayer passes on to the customers as a “Non-Cash Adjustment.”
All items on the menu are listed with the price if one pays cash and, if a customer pays with a credit card,
a “Non-Cash Adjustment” of 3.5% is added to the bill. The credit card processing company the restaurant
uses regards cash discounting as a “Non-Cash Adjustment” and not a surcharge. If a customer purchases
an item on the menu advertised as costing $100 and chooses to pay with a credit card, an additional line
is added to the bill for $3.50 (i.e., 3.5% of the menu item price) as a “Non-Cash Adjustment.” The total
bill would then be $103.50 (without sales tax). All the money Taxpayer collects for the meals, including
the 3.5% “Non-Cash Adjustment,” is remitted directly to the credit card processing company on a daily
basis. The credit card processing company deducts its 3.5% for the credit card sales and returns the
remaining money to Taxpayer a few days later.
There is a sign on the wall and a notice in the menu about the “Non-Cash Adjustment” policy. The sign
contains language to this effect:
Price listed in-store and on advertisements reflects our cash price. Our regular price
includes a 3.5% Non-Cash Adjustment. We offer savings at the point of sale when you
pay with cash!
In small print, the sign states: The purpose of the non-cash adjustment is to incentivize
customers to pay with cash. This is an “in-kind incentive” in compliance with section
(2)(A) of the Durbin Amendment, a provision of United States Federal Law, 15 U.S.C. &
169o-2. We further provide a Cash Discount from the regular price in accordance with
section (4)(c)(4) of the same document. . . .
In its materials about the program, the credit card processing company emphasizes that the service charge
is not a surcharge. Taxpayer’s representative would like to know whether the “Non-Cash Adjustment”
would be subject to sales tax.
Taxpayer’s Argument
Taxpayer’s representative does not have a position in this matter.
Applicable Law and Discussion
As an initial matter, it is noted that this TAA takes no position regarding the applicability or effect of the
Durbin Amendment, referenced above.

XXXXXXX
March 24, 2022
Florida Department of Revenue
Page 3

It is further noted that subsection (1) of s. 501.0117, F.S., provides in pertinent part:
(1) A seller or lessor in a sales or lease transaction may not impose a surcharge on the buyer or
lessee for electing to use a credit card in lieu of payment by cash, check, or similar means, if the
seller or lessor accepts payment by credit card. A surcharge is any additional amount imposed at
the time of a sale or lease transaction by the seller or lessor that increases the charge to the buyer
or lessee for the privilege of using a credit card to make payment. . . . The term “credit card”
includes those cards for which unpaid balances are payable on demand. This section does not
apply to the offering of a discount for the purpose of inducing payment by cash, check, or other
means not involving the use of a credit card, if the discount is offered to all prospective customers.
The Department of Revenue does not administer the provisions of ch. 501, F.S. Accordingly, this TAA takes
no position regarding the applicability or effect of subsection 501.0117(1), F.S.
Section 212.05(1)(a), F.S., provides that every person that engages in the business of selling tangible
personal property at retail in this state is exercising a taxable privilege. Sales of food and beverages in
restaurants are subject to tax unless a specific exemption applies. See s. 212.02(15)(d), F.S.; Rule 12A1.0115(2)(a), F.A.C.
Under the specific facts presented and the hypothetical outlined above, Taxpayer will be charging one
price to customers paying cash ($100.00) and a different price to customers paying by credit card
($103.50). The extra amount charged to those paying by credit ($3.50) represents the charge to Taxpayer
by the credit card processing company for each transaction paid by a credit card.
“Sales price” is defined in pertinent part as:
. . . the total amount paid for tangible personal property, including any services that are a
part of the sale, . . . and includes any amount for which credit is given to the purchaser by
the seller, without any deduction therefrom on account of the cost of the property sold,
the cost of materials used, labor or service cost, interest charged, losses, or any other
expense whatsoever. . . .
See s. 212.02(16), F.S.
Section 212.02(16), F.S., clearly provides that an expense of the seller is part of the taxable “sales price”
when passed along - here as the “Non-Cash Adjustment” - as a cost to the purchaser. Accordingly, under
the hypothetical provided, the taxable “sales price” to customers paying cash would be $100.00, and the
taxable “sales price” for customers paying by credit card would be $103.50.

XXXXXXX
March 24, 2022
Florida Department of Revenue
Page 4

Conclusion
Florida sales tax is due on the total sales price of meals paid by customers.
This response constitutes a Technical Assistance Advisement under section 213.22, F.S., which is binding
on the Department only under the facts and circumstances described in the request for this advice as
specified in section 213.22, F.S. Our response is predicated on those facts and the specific situation
summarized above. You are advised that subsequent statutory or administrative rule changes, or judicial
interpretations of the statutes or rules, upon which this advice is based, may subject similar future
transactions to a different treatment than that expressed in this response. You are further advised that
this response, your request and related backup documents are public records under Chapter 119, F.S.,
and are subject to disclosure to the public under the conditions of section 213.22, F.S. Confidential
information must be deleted before public disclosure. In an effort to protect confidentiality, we request
you provide the undersigned with an edited copy of your request for Technical Assistance Advisement,
the backup material, and this response, deleting names, addresses, and any other details which might lead
to identification of the taxpayer. Your response should be received by the Department within 15 days of
the date of this letter.
Sincerely,

Alan R. Fulton
Alan R. Fulton
Revenue Program Administrator I
Technical Assistance & Dispute Resolution
cc:

XXXXXXX
XXXXXXX
XXXXXXX
XXXXXXX

Record ID: 583483