I was thinking about the fees that my merchant service charges me every month when it dawned on me, they are charging me interest on the total dollar amount that I process every month, which includes sales tax. So I called my company to ask them about it. After I posed my question to the customer service rep I was put on hold for about five minutes while he researched the question. When he came back he told me it would require further investigation and he would have to call me back. He called back in 30 minutes with an answer that was totally unsatisfying. According to my contract the company is allowed to charge interest on the total amount purchased which includes sales tax. Not happy about it but at least I get to write off all my cc charges on my taxes.
But that got me thinking about my credit card purchases which incure the same interest charged on sales tax, that I don't get to write off. I called two of my companies and the answer I was given was that they had no way of knowing what part of the total was sales tax. Ok I understand that, but I posed the question, if I sent in documentation every month of the sales tax would they then reduce the amount from my total. I think you can guess the answer.
Whenever I posed the question of the legality of what they were doing, it was side stepped and evaded. I can't believe this is legal. This is a HUGE revenue stream for credit card processors that I don't think they can legally charge.
I'm trying to contact a consumer advocate about this, but if any of our members have any knowledge on this subject, please post.
Comments
Actually Lori I think you should be a lot madder.......
Yes you are paying a fee for the collected sales tax which comes out of your pocket. It could also be described as negative interest. But that is just the tip of the iceberg. All merchant accounts are front men for a larger financial institutions. When your cc deposit is made into your account I will venture to say that you will be paid almost no interest on your total bank balance. Yet if you go to the bank and want to borrow some of the money there will be some agreement made as to how much more you will pay back to the bank. All while the Fed is pumping 85 billion a month of interest free money into the banking system. But I digress. Back to state taxes. Now about the labyrinth of state dept of revenue systems that must be navigated in order to pay back those taxes. Some are easy some are simply a pain. Have you noticed that if you want to pay by cc in some of online sites that they are charging an extra fee for that transaction(recently made legal and something you can do also with your cc customers). For all the talk about small businesses in Congress I doubt they will be addressing transient vendor issues anytime soon. That is why I would like it if everyone connected to this site would send me a crisp $100 bill and I will travel the 6 hrs to DC and try and take a Senator out to lunch and see if we can fix this problem for Lori.
I bet you can't wait to be my neighbor for a weekend.
I have to step in and correct one item I saw above. the credit card company may be TEMPORARILY accepting the risk for you but it's not done deal as was stated. I once owned a bakery and got a really good order from my web site but something just didn't sound right so even though the card machine gave me an approval code I called the company and asked if the person who placed the order was actually the card holder. No. Matter of fact according to my card company they had been watching transactions on that card for some time becuase of suspicious activity. Of course I voided the sale and then I asked the card company what would have happened had the original card holder questioned the sale. No problem, they'd just go into my bank account and take the money back. So much for the approval codes meaning anything or the card company protecting you. Make sure if you have any questions that you do a much due diligence (Including checking ID) as possible.
Lori - I don't think there is a legal issue at all. The credit card company charges you a processing fee (not interest) on the amount of money your customer is paying you. It shoudn't matter how much of that is your sale and how much of that is tax - it is all money they are handling for you. If you don't like it, take cash or checks.
I've found the Intuit service to be very good, and I can (and should) download my merchant stuff right into QuickBooks. Be sure to consider the Intuit option when you're looking at smart phone options.
BTW, my smart phone plus merchant costs are lower overall than my merchant costs alone before I went with smart phone processing--and no machine to tote around.
after decades with a traditional merchant account and an average of $400 a year in fees.... i happily switched to square and an ipad at the beginning of this year; i know there are a lot of people out there who loath square, but.. what can i say, so far i have had no problem.
i am ok with the 2.75% fee on swiped transactions and even when, on rare occasions, i had to keyed in the cc number, i had no issues and my money was quick to get into my account within 24-48 hours.
limit on 'keyed in' transactions and the lack so far of direct customer service is a nuisance, and i will be requesting a higher limit soon in light of a bigger show i will be doing in boston in december, but overall i am happy to pay the flat fee and be done with it.
as pat. lawrence and nolly pointed out, this is the cost of doing business and some merchant services are better - or worse, than others.
my 2 cents.. :-)
There are options for reducing your overall processing fees; it's a percentage, but not all percentages are tax! Look for lower fees, and you'll be happier.
If you have a smart phone, use any one of the multiple services now available for phone-based processing. Lots of people use Square, I use Intuit, and I know there is at least Paypal, and probably several more. The fees are lower than traditional processing, no monthly fee, no statement fee, etc.
As others have said, this is a cost of doing business, just the same as buying bags and putting gas in your tank. Your merchant fees are deductible, of course.
I am a little confused. When you sell something, the customer pays you X + sales tax=gross sale. The credit card company is charging you to process the gross sale, not the net. What they are doing is not part of your sale, but handling the gross sale. No differentiation is made or necessary. The credit card company is not CHARGING you interest to process the sale, they are charging you a % of the sale to handle the "convenience" money.
And what about your personal cards, paying sales tax and then being charged interest on that tax is unacceptable. I would love not to use my cards but unfortunately...........
I guess I do not understand why you are mad as hell... The merchant processor makes their money by processing credit cards transactions for you, not doing your accounting. It is part of the cost of doing business. If you do not like it then do not take credit cards.