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United States · California · San Francisco

Card processing rules for San Francisco merchants

This page covers what is actually different once you cross into San Francisco city limits — the reporting duty behind the "SF Mandates" line diners see on restaurant checks, and how it sits on top of California's statewide pricing law.

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The health care surcharge is optional — the reporting once you use it is not

San Francisco's Health Care Security Ordinance (HCSO) requires covered employers to spend a minimum amount per hour on health care for covered employees. The ordinance itself, per the city's own administrative guidance published through the Office of Labor Standards Enforcement (OLSE), does not require or prohibit an employer from adding a surcharge to customer checks to help cover that cost — that choice, often labeled "SF Mandates," "Healthy SF surcharge" or similar on a receipt, is entirely the employer's. What is not optional is what follows once an employer chooses that path: a covered employer that imposes such a surcharge must report to OLSE, annually, both the amount collected through the surcharge and the amount actually spent on covered employees' health care.

The consequence that makes this a real compliance obligation rather than a pricing footnote: if the surcharge collected in a year exceeds what the employer spent on covered employees' health care, the administrative guidance requires the employer to irrevocably spend that excess on health care for those employees rather than retain it as ordinary revenue. A business that funds its HCSO obligation purely through higher menu prices, with no separate line item, does not take on this specific reporting and true-up duty — it is a consequence of the surcharge mechanism itself, not of the underlying health-spending requirement.

Where this actually bites a business

The practical failure mode is a restaurant that adds the surcharge line because a competitor does, treats the collected amount as general revenue rather than tracking it against actual health spending, and only discovers the annual OLSE reporting requirement — or the true-up obligation on a surplus — well after the money has already been spent elsewhere. Multi-location operators who use a surcharge in some San Francisco locations but not others need separate tracking for each, since the reporting duty attaches to the specific location that imposes the charge.

$4.11 per payable hour for 2026 — the figure the surcharge is sized against

For 2026, San Francisco's published Health Care Expenditure rate requires employers with 100 or more workers to spend at least $4.11 per payable hour on covered employees' health care, with a lower tier for mid-sized employers and an exemption for managerial, supervisory and confidential staff earning above the ordinance's income threshold, according to benefits-industry summaries of the city's published 2026 rate notice. That per-hour figure — not a fixed percentage of the check — is what a restaurant is typically sizing a surcharge against when it adds one, though the ordinance sets no required surcharge amount or percentage; the sizing choice, like the decision to surcharge at all, sits with the employer.

That number matters for payments in a narrower but real way: if a surcharge is processed as part of the card transaction rather than collected separately, it becomes part of the amount authorized on the card, and interchange and your processor's discount rate apply to it in full the same as they apply to the underlying sale and its sales tax. A surcharge meant to offset a fixed labor cost ends up carrying a card-processing cost of its own on top, which is worth modeling before deciding how the surcharge is priced and disclosed.

We are not going to hand you a dollar figure for what any of this costs your business, because it depends entirely on headcount, payable hours, card mix and pricing structure, and any processor who quotes a saving before reading your statement is guessing. What we will say is that a San Francisco restaurant running a health care surcharge should know exactly how much of it is running through the card network before deciding whether to fold it into menu prices instead.

Two business types, two different problems in San Francisco

For a San Francisco restaurant, the HCSO surcharge question sits alongside the statewide SB 478 pricing-display rule our restaurant payment processing hub and our Los Angeles page cover in more depth — SB 1524's food-service carve-out affects how a mandatory service charge or surcharge can be displayed on a menu, and a restaurant running both an HCSO line and a service charge needs both disclosed correctly and priced separately in its point-of-sale system, not blended into one ambiguous line.

San Francisco retail is affected by the underlying HCSO spending requirement the same as restaurants — headcount and payable hours drive the obligation regardless of industry — but retail checks carry the surcharge line far less often in practice, since it is largely a restaurant-industry norm rather than a retail one. Our retail payment processing hub covers the general mechanics retail merchants need regardless of whether a surcharge is in use.

Sources

Updated 18 September 2026. General information, not legal or tax advice. Rules change; confirm current rules with San Francisco OLSE, the California Department of Tax and Fee Administration, your attorney and your accountant before you register, file or change how you price.

Related pages

San Francisco FAQ

Asked by San Francisco businesses

It is a surcharge some San Francisco employers add to customer checks to help offset what the city's Health Care Security Ordinance (HCSO) requires them to spend on covered employees' health care. The ordinance itself does not require or prohibit a surcharge — that choice is the employer's — but an employer who does impose one takes on specific reporting duties to the city's Office of Labor Standards Enforcement (OLSE) that an employer who simply raises menu prices does not.

A covered employer that imposes a surcharge to cover HCSO costs must report to OLSE, on an annual basis, how much the surcharge collected and how much was actually spent on covered employees' health care. If the surcharge collected exceeds what was spent, the ordinance's administrative guidance requires the employer to irrevocably spend that excess on covered-employee health care rather than keep it as revenue. That reporting duty is specific to choosing the surcharge path; a business that funds its HCSO obligation entirely out of menu pricing does not carry it.

For 2026, San Francisco requires employers with 100 or more workers to spend at least $4.11 per payable hour on covered employees' health care, with lower tiers for smaller employers; managerial, supervisory and confidential employees earning above the ordinance's exemption threshold are excluded. That per-hour rate is set and adjusted by the city, and it is the figure a surcharge is typically sized against, though the ordinance does not mandate a specific surcharge percentage or dollar amount.

Yes. SB 478 is a statewide rule governing when any advertised or displayed price must include all mandatory fees, and it applies in San Francisco the same as everywhere else in California — our Los Angeles page covers its mechanics and the food-service carve-out in SB 1524. The HCSO surcharge sits on top of that as a San Francisco-specific reporting obligation tied to a specific municipal ordinance, not a substitute for it.

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