Illinois told merchants that card networks could not charge interchange fees on sales tax and tips — then delayed the ban to 2027, then a federal court said the state-tax part can stand.
What the Ban Tries to Do
The Illinois Interchange Fee Prohibition Act says that an interchange fee — the 1.5–3.5% a card network and acquiring bank charge on a transaction — cannot be charged on the Illinois sales tax portion or the tip/gratuity portion of a transaction. For a $100 sale with $8.25 in Illinois sales tax and a $15 tip, the fee could only apply to $100, not to $123.25.
Delayed to 2027: The legislature pushed the effective date to mid-2027 after implementation questions from networks and acquirers: how to identify the tax and tip leg at the network level, and how to rebate the fee without breaking settlement.
Federal court in 2026: The district court upheld the ban as applied to state tax (the state can bar fees on its own tax), but enjoined the tip portion on federal preemption grounds under the National Bank Act, at least for national banks. That split leaves merchants in a half-ban until appeal.
What Small Merchants Should Do Now
- Don't adjust your point-of-sale yet: The ban is not effective, and the tip portion is enjoined. Continue to accept that the fee is charged on the full transaction.
- Tag tax and tips separately: Your ledger already should:
Revenue $100/Sales Tax Payable $8.25/Tips Payable $15— not one gross. That separation is the data you will need if the ban takes effect and you must reconcile a fee that excludes two legs. - Reconcile the fee at gross vs. net: Today, the processor reports fees on gross $123.25. After a tax-only ban, the fee basis would be $115 (gross minus tax, but including tips if enjoined). Keep the reconciliation gross-to-net, so the change is visible as a fee-basis change, not as a revenue change.
Keep Your Finances Organized From Day One
A fee ban that is half-effective and half-delayed is still a bookkeeping requirement. Separate revenue, tax, and tips as three legs now, and the fee that is excluded later is just a leg you already track.
Beancount.io keeps each sale as a transaction with revenue, tax, and tips as separate accounts, version-controlled and reconcilable to the processor's fee basis. Get started for free and make the next fee rule a report, not a retrofit.