ARIZONA STATE SENATE
Phoenix, Arizona
credit cards; taxes; fee
Purpose
Exempts the Department of Revenue
(DOR) from certain requirements regarding credit card transactions when a
credit card is used to pay taxes.
Background
In 2000, a bill was passed
allowing all state agencies to accept credit cards as a form of payment. As with any business or agency that accepts
credit cards, there is a one to two percent fee that is subtracted from the transaction
by the bank. This fee is subtracted prior to deposit into the appropriate state
fund. resulting in the fees being deducted and paid from the revenue side
before being deposited to the Treasury. This net amount is considered the full
deposit required of monies received by the agency.
There are two types of fees:
a discount rate charged by the processing bank and a convenience fee charged by
a third party vendor that handles the transaction. As an example of the discount rate, a taxpayer has a $100
liability to DOR. The taxpayer
initiates a $100 payment via credit card to DOR. The credit card company is entitled to $1.70 for processing the
transaction. (There is a 1.7 percent discount rate as negotiated under the
existing contract with the State Treasurer.)
DOR will then deposit the remaining $98.30 into the state general
fund. The taxpayer liability is
considered satisfied.
There is also a convenience
fee that is a per transaction charge.
Convenience fees are commonly utilized by third party agents such as web
based or telephone based service providers to charge taxpayers a fee for using
their applications to originate a tax payment.
The interpretation by DOR is that since the convenience fee is a result
of a transaction between the third party and the taxpayer, there is no
applicable convenience fee to be taken off the top of revenues. Instead, it is a fee in addition to the
liability. For example, if a taxpayer
has a $100 liability and chooses to utilize a web or telephone based service provider
the taxpayer would be charged $103 to satisfy the $100 liability. In this case the taxpayer is paying $3.00
for the convenience of using a credit card resulting in no impact to the state
general fund.
However, some are
interpreting the law passed last year to include the convenience fees as part
of the credit card fees to be paid from the revenues before they are
deposited. Under that interpretation,
if there is a 1.7% credit card fee plus a $2 convenience fee for a $100
transaction, a total of $3.70 (1.7% +$2) would be taken off the top of the
revenue before the net $96.30 is deposited to the Treasury.
Currently, DOR does not
accept credit card payments, and S.B. 1240 would give DOR the ability to absorb
the costs or pass all or part of them onto the taxpayer in the event that DOR
does start accepting credit card payments. S.B. 1240 would conform state
statute with federal practice, as the IRS currently requires the taxpayer to
absorb all the costs of paying taxes with a credit card.
Additionally, all state
agencies or authorized agents of state agencies that accept credit card
payments must submit an annual report to the Governor’s Office of Strategic
Planning and Budgeting (OSPB) accounting for the payment of fees associated
with accepting credit card payments.
1. Exempts DOR from the ability to deduct any applicable discounts or convenience fees before depositing the net amount in the appropriate fund, when accepting a credit card for payment of taxes.
2. Exempts DOR from the requirement that they file a report with OSPB to account for any fees associated with accepting credit cards for payment of taxes.
3. Provides for a general effective date.
Prepared by Senate Staff
February 8, 2001