Card fees on sales tax? Illinois just lit a fuse. We unpack who really pays, how ISOs get squeezed, and why “compliance” might mean three prices at checkout.

When lawmakers target “junk fees,” the payments engine doesn’t stop—it reroutes. We dive into Illinois’ push to exclude sales tax from the interchange base and trace how that single change ripples through card networks, processors, ISOs, ISVs, and ultimately the merchants serving customers at the counter and online. From geolocation puzzles to settlement rails, we unpack why a tidy policy headline can turn into a systems overhaul with real costs.

We mark our 100th episode hosted by James Huber and Christopher Dryden, managing partners of Global Legal Law Firm, by unpacking Illinois’ move to bar interchange on sales tax and the cascade of costs, risks, and confusion it creates across networks, processors, ISOs, and merchants. Along the way, we tackle broken surcharging myths, multi state carve outs, and a jaw dropping processor clawback story.

• Illinois ruling removing sales tax from the interchange base
• Geolocation and where online transactions “occur”
• Who bears costs when networks retool pricing and rails
• Visa and MasterCard rules versus state law limits
• Dual pricing and three price confusion at checkout
• Wisconsin’s “swipe fee” approach to surcharges on tax
• Contract clauses shifting programming liability to ISOs
• Enforcement leverage by AGs and regulators
• Data opacity, dispute windows, and clawbacks
• Practical protections for merchants and ISOs

We share concrete scenarios that expose the friction: ecommerce orders where the buyer, website registration, and settlement all live in different states; dual pricing menus that could morph into three prices to stay compliant; and Wisconsin’s “swipe fee” twist that blocks surcharges on tax and forces software to re sequence calculations. We also challenge common myths around surcharging caps, explain how network rules differ from laws, and show why bundled software vendors often limit configuration in ways that quietly shift costs back to merchants.

Beneath the policy debate sits a harder truth about liability and transparency. Contracts are moving risk downstream, pinning programming and compliance errors on ISOs while processors hold the data and the levers. We walk through a live case where a routine underpayment inquiry ballooned into a multi million dollar clawback, highlighting how short dispute windows and opaque reporting can silence smaller players. Still, the legal standard recognizes that you can’t waive claims you couldn’t discover, which makes better disclosures, audit rights, and data access non negotiable.

If you work anywhere in the payments stack—merchant, ISO, ISV, or counsel—this conversation offers practical guardrails: tighten contract language around discovery and fee transparency, cap programming indemnities to vendor specs, demand auditable location logic, and push for coordinated state rules to avoid patchwork chaos. Subscribe, share this with a colleague who handles fees or pricing, and leave a review with your take: does state by state policymaking fix the problem or just raise the bill?

Think you know surcharging rules? Visa caps, state carve outs, and web geo gotcha’s say otherwise. We break down the Illinois ruling and the hidden costs merchants will eat.

**Matters discussed are all opinions and do not constitute legal advice. All events or likeness to real people and events is a coincidence.**

PEP Links:
https://www.globallegallawfirm.com/podcasts/
https://www.buzzsprout.com/2176695

A payments podcast of Global Legal Law Firm