Rep. Setzer files bill in North Carolina House to prohibit interchange fees on taxes and gratuities

A new bill filed by State Rep. Setzer seeks to prohibit interchange fees on the tax or gratuity portions of electronic payment transactions to protect merchants from additional charges, according to the North Carolina State House.

The bill, filed as HB 650 on April 1 during the 2025 regular session, was formally listed with the short title: ‘No Interchange Fees on Sales Tax or Tips.’

The following is our breakdown, based on the actual bill text, and may include interpretation to clarify its provisions.

In essence, this bill amends Chapter 66 of the General Statutes to prohibit interchange fees on sales tax or gratuities in electronic payment transactions. Effective Oct. 1, 2025, it disallows issuers, payment card networks, acquirer banks, or processors from receiving or charging merchants interchange fees for the tax or gratuity portion of transactions, provided merchants inform the acquirer bank of these amounts during the authorization or settlement process. If merchants fail to transmit this data, they can submit tax documentation within 180 days to receive a credit. The bill also penalizes attempts to evade this prohibition by adjusting fee computation and allows the Attorney General to seek injunctive relief and civil penalties for violations. Additionally, it restricts the use of transaction data by non-merchants outside processing needs or legal obligations.

Of the three sponsors of this bill, Neal Jackson proposed the most bills (29) during the 2025 regular session.

Bills in North Carolina follow a multi-step process before becoming law. A lawmaker starts by filing a bill, which is assigned to a committee for review. The bill must be read three times in each chamber. If one chamber changes the bill after the other passes it, both must agree on the final version. Once both chambers approve the same bill, it goes to the governor, who has 10 days (or 30 if the legislature is not in session) to sign, veto, or let it become law without a signature.

You can read more about the bills and other measures here.

Setzer graduated from the University of North Carolina, Greensboro in 1987 with a BA.

Setzer, a Republican, was elected to the North Carolina State House in 1999 to represent the state’s 89th House district, replacing previous state representative Robert Brawley.