Sales Tax on Credit Card Surcharges: State Guidance

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Not tax advice or legal advice. This page is general information dated September 17, 2026. It covers only the state revenue department guidance linked below. Whether you may surcharge at all is a separate question, decided by state law and card network rules; see our guide to surcharge laws by state. Tax rules change, and some guidance applies only to the facts of the business that asked. Confirm the treatment for your business with your state revenue department or a tax professional. CELER Merchants is an independent merchant services agent, not a tax adviser.

Why this question comes up

A surcharge is an extra fee added when a customer pays by credit card. Many businesses assume it is a pass-through of their processing cost and leave it out of the sales tax calculation. Several state revenue departments disagree: they treat the fee as part of what the customer pays for the taxable item. If you get this wrong, the business, not the customer, may owe the uncollected tax.

What four states say

The table summarizes guidance from each state's revenue department. It is not a list of every state's rules.

Alabama: separate the fee on the receipt

The Alabama Department of Revenue's FAQ says that beginning September 1, 2026, a credit card transaction fee is not subject to sales or use tax if it is separate and identifiable from other charges. The department's example: a $100 purchase with a $3 credit card transaction fee. If the receipt clearly shows them as two separate charges, tax is charged only on the $100 purchase. If the receipt shows one total of $103 without clearly separating the fee, sales tax applies to the full $103. If you surcharge in Alabama, check that your terminal and receipts show the fee as its own line.

New York: the fee follows the sale

In Advisory Opinion TSB-A-18(1)S, dated April 12, 2018, the New York Department of Taxation and Finance concluded that a convenience fee a club charged when credit cards were used is properly included in the amount on which sales tax is calculated. The opinion says expenses a vendor incurs in making a sale are not deductible from its receipts. It also says that if taxable and nontaxable items are bought in one transaction and separately itemized, tax is due only on the part of the fee attributable to the taxable items. The department notes that an advisory opinion is limited to its facts and binds the department only for the person who asked, so treat it as guidance. New York also has its own surcharge disclosure law; see our New York guide.

Washington: separate listing does not help

The Washington Department of Revenue says surcharges added to cover business costs are generally subject to tax, and it lists credit card processing fees among the costs businesses may add surcharges to cover. It says surcharges are taxable under the same tax classification used for the good or service purchased, and that they can't be deducted from the selling price even if listed separately on the invoice.

Wisconsin: a worked example

Wisconsin Tax Bulletin 229 (April 2025) says a retailer's additional charge for paying by credit card is part of the sales price, so the fee is taxable if the product or service is taxable. The department's example: a customer buys $30 of taxable prepared food where the Wisconsin sales tax rate is 5.5%, and the restaurant adds 3% for paying by card. The fee is $0.90, taxable receipts are $30.90, and the tax is $1.70. The bulletin says the department contacts retailers who are not properly charging sales tax on such fees.

What to check before you surcharge

1. Confirm surcharging is allowed where you sell, under state law and card network rules. 2. Look up your state revenue department's guidance on surcharges, convenience fees or credit card fees. If you cannot find any, ask the department or a tax professional. 3. Check how your POS or gateway calculates tax: before or after the surcharge is added. 4. Check whether the fee appears as its own line on the receipt, which matters in Alabama. 5. If you sell both taxable and nontaxable items, ask whether you may allocate the fee, as New York and Wisconsin describe. 6. Keep records of how you calculated tax on surcharged sales.