The owners of the Charleston restaurants Xiao Bao Biscuit and Tu will no longer charge a 2.5% “convenience fee” on receipts for credit card purchases in response to questions posed by the Charleston Post and Courier.
The investigation started when a reader was looking for answers after she was billed a 13.5 sales tax on a lunch at Xiao Bao Biscuit. The correct rate should have been 11%, based on Charleston
County’s 9% sales tax and the city’s 2% hospitality tax. But a snapshot of the restaurant receipt only showed a single line item of “Sales Tax” for the collection of the three fees.
Restaurant co-owner Josh Walker said he had been collecting the convenience fee on the advice of the businesses’ credit card processor, Dezba Payment Solutions, as a way to offset ever-rising credit card processing fees.
South Carolina is not one of the 10 states that have prohibited convenience fees, but credit card companies do outline rules on how those fees must be disclosed. Convenience fees are not allowed in “card-present environments,” meaning the credit card and customer are in the same physical space, as opposed to online transactions (however, the Dodd-Frank Act does allow surcharges on credit card purchased under $10).
State law gives the Department of Revenue license to place a 150% fine of the surplus collected if businesses are found to charge excessive taxes.
While Walker said he will no longer charge the fee, he told the Post and Courier that small business owners have to not lose ground on the costs of credit card processing.
“If you believe small businesses should not charge these small incremental fees, that is understandable and everyone is entitled to an opinion. But, as fees have risen and larger corporations are implementing such practices, I think many small business owners like us are trying to protect themselves as well.”