SALT Report 2738 – The Kansas Department of Revenue issued an opinion letter regarding the application of sales tax to credit and debit card processing fees. The Department states that line item processing charges are to be included in the tax base and are subject to tax when the item or service is taxed.
Specifically, K.A.R. 92-19-3a(e) states that fees are subject to tax and are part of the tax base of the transaction. Therefore, the processing fees are taxable if the items or services being purchased are taxable. Alternatively, the processing fees are exempt if the items or services being purchased are exempt.
Additionally, the regulation states that if you make sales or provide services to a school or entity that provides an exempt entity exemption certificate, the processing fee isn’t taxable because the line-item charges would not be taxed due to the exempt status of the school or entity.
Finally, the Department states that the interchange fees that credit card companies deduct from a retailer’s account cannot be deducted from the retailer’s gross receipts and cannot be used to reduce the amount of sales tax reported.
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