Minnesota Credit Card Surcharge Laws

Merchants and consumers alike should both be aware of the credit card surcharge laws in Minnesota. 

For businesses, this information will help you stay compliant and avoid any potential fines, fees, or legal penalties. And as a consumer, keeping yourself informed on the surcharge laws in your state can prevent you from getting ripped off by companies in violation of the law.

Here are the quick facts you need to know about surcharging credit card transactions in Minnesota:

• It’s currently legal for businesses to impose a credit card surcharge fee (for the rest of 2024).
• Minnesota state law allows credit card surcharges up to 5% of the purchase price (but Federal law caps this at 4%).
• There’s a $500 fine per violation, and a refund must be issued to each buyer.
• Credit card surcharges in Minnesota are subject to sales tax and use tax.
• Effective January 1, 2025, it will be illegal for businesses to surcharge credit card transactions.

There’s a lot to unpack here, so we’ll dive deeper into the specifics of these surcharge laws below.

Disclaimer: This information is for reference only, and it does not constitute legal advice. Consult with an attorney with any legal-specific questions.

Is it Legal to Surcharge Credit Card Transactions in Minnesota?

Yes, it’s currently legal for Minnesota businesses to add a surcharge to transactions paid by credit card. 

According to Minnesota Statute 325G.051, surcharges on credit cards are allowed if the following conditions are met:

• The customer chooses to pay via credit card instead of cash, check, or debit card.
• The merchant posts a sign on the premises notifying customers of the surcharge fee.
• The merchant verbally notifies the customer of the surcharge at the time of the transaction.
• The surcharge does not exceed 5% of the purchase price.

There are two really interesting points to Minnesota’s surcharge laws that I want to highlight—as they’re notably different from the surcharge laws in other states. 

First, merchants must orally notify the customer of the surcharge for each transaction. This is really important for any business that’s currently surcharging credit card transactions in Minnesota or plans to do so. Failure to notify your customers verbally (in addition to the posted sign) can result in a $500 penalty per violation. 

Second, Minnesota allows credit card surcharges up to 5% of the purchase. But with that said, any credit card surcharge over 4% is in violation of federal law, which supersedes state laws. So in effect, merchants in Minnesota can only add a 4% surcharge on credit card purchases to truly remain within the confines of the law—otherwise you’ll be subject to legal penalties at the federal level. 

Surcharges Fees Cannot Be Added to Store-Branded Credit Cards in Minnesota

It’s also worth noting that Minnesota prohibits credit card surcharges if the card is issued and established by the business. 

For example, if you have a Macy’s credit card, a Macy’s store in Minnesota can’t legally charge you a surcharge fee if you’re using that store-branded card to pay for something. 

Surcharging vs. Cash Discounts in Minnesota

Minnesota Statute 325G.051 also clarifies the differences between surcharging and cash discounts in the eyes of the state. 

For the purposes of this law, the term “surcharge” only refers to fees imposed by a seller in which the price of goods or services increases because the consumer uses a credit card to pay. 

It does not govern discounts offered by sellers to buyers who pay by cash, check, debit, or similar means. 

Is it Legal to Surcharge Debit Cards in Minnesota?

No.

Debit card surcharging is prohibited in all 50 states, including Minnesota. 

How Are Credit Card Surcharge Fees Taxed in Minnesota?

Surcharge fees are taxable in Minnesota. This is governed by state Statute 297A.62 for when sales tax is imposed in the state.

The law has been challenged by merchants in the past, although the appeals have been unsuccessful. 

Most notably was in the case of Kurt W. Martin v Commissioner of Revenue, Docket No. 9499-S. In April 2022, Minnesota Tax Court upheld a ruling that credit card surcharges are subject to both sales tax and use tax. 

In this particular case, the taxpayer operated a vacation rental business in which they added a 4% surcharge to cover credit card processing fees. This was done legally based on Minnesota’s surcharge laws. However, the business was trying to claim that the 4% surcharge should be exempt from taxes. 

Simply put—if you’re surcharging credit card transactions in Minnesota, you need to include those fees in your gross receipts for tax purposes. 

Credit Card Surcharging Will Officially Become Illegal in Minnesota in 2025

Most of what’s been mentioned above will be obsolete next year. That’s because Minnesota Governor Tim Waltz just signed a new bill, HF 3438 to ban surcharging state-wide.

This new law goes into effect on January 1, 2025—officially making it illegal for merchants in Minnesota to surcharge credit card transactions.

The law itself mostly pertains to consumer protections, deceptive trade practices, and failing to disclose mandatory fees. However, there is specific wording in the bill that pertains to surcharging. 

Minnesota considers it a “deceptive trade practice” if a merchant “advertises, displays, or offers a price for goods or services that does not include all mandatory fees and surcharges.”

To comply with the new law, Minnesota businesses must include any and all surcharges in the advertised and listed price of an item—not as a separate fee. 

Simply disclosing the fee to customers with a posted sign and with a verbal notice (which is what’s currently required), will no longer cut it when the calendar turns the page to 2025. 

Final Thoughts: What Steps Can Merchants Take Before Minnesota’s Surcharge Ban Goes Into Effect?

Surcharging is a hot topic in all 50 states. In recent years, we’ve seen a significant increase in businesses adding surcharge fees to credit card transactions—particularly in the restaurant, food, and beverage space.

While most states allow credit card surcharges, Minnesota is one of the latest states to ban surcharging after previously allowing it. This new law goes into effect just five months after California’s new surcharge ban gets implemented, and I’m anticipating other states to follow suit. 

I can see why Minnesota businesses currently surcharging credit card transactions would be upset by this ruling. Some of you may feel as though you’re instantly losing 4% of gross receipts on credit card transactions. And raising prices is never an easy decision.

That said, this is far from a death sentence for your business—and there are other ways you can reduce your credit card processing fees. 

Most businesses don’t realize that credit card processing rates are negotiable. That’s right—you can negotiate directly with your existing processor for a rate reduction without having to switch providers or change any of your operations. 

In addition to a rate reduction, you should also be monitoring your statements for bogus fees, extra charges, and padded assessments. Eliminating these hidden fees alone could save you thousands each month, which helps offset the inability to surcharge credit card transactions.

If you need help auditing your statements, our team is here for you. Just reach out for a free analysis to find out how much you can save. We’ll even handle the negotiations with your processor so you can focus on running your business.