Location: Texas
Sorry, this is a long read but the details are necessary. Please keep in mind for my particular situation, I’m talking about debit card payments.
I have a potentially very messy situation where a local aerial arts studio has been surcharging my debit card for years. I have receipts going back to 2022 showing a surcharge on my debit card payments. I didn’t know a business couldn’t surcharge debit cards. The aerial community is small here and I thought the studio owner could be trusted.
The only reason I started researching is because she announced to her customers through a mass text message that the “merchant fee will increase from 4.5% to 8.5%” and says that this will help “cover both the processing fees charged by our payment platform and taxes”
This immediately raised red flags and I started digging into merchant fees, surcharges, and sales tax.
All my receipts from this studio have the subtotal (price of the classes) listed and below that it says “Surcharges” with no percentage of the surcharge listed after and no other indication what the surcharge is for. No where on these receipts has there been a line item for sales tax.
Here is what I already know:
- Debit card surcharges are prohibited by the Durbin Act and the Dodd-Frank Act.
- Surcharge fees on credit cards can’t exceed 4%
- Visa/Mastercard have policies where a business can only surcharge credit cards up to the amount that covers the cost of payment processing
- A business has to list sales tax as sales tax on their receipts. Otherwise this could be violating tax regulations.
- The total sales tax in the city is 8.25%
Most if not all the services she provides can’t be taxed so there shouldn’t be a sales tax at all. They fall under the category of “Live Instructional Studio Classes” which the Texas comptroller website states are not taxable. https://star.comptroller.texas.gov/view/202202003N
I looked at my past receipts from another aerial studio from 2021 and they didn’t charge me sales tax. I paid them with the same debit card I’ve used with this current studio and there was no surcharge.
I’ve talked to a close friend who is also going to this studio. She uses a credit card to pay so even the 4.5% surcharge that’s been happening isn’t allowed. It’s capped at 4%. I even looked into the payment platform she uses and the fees she is potentially charged doesn’t get up to 4%.
Nowhere does she explain what “taxes” she is talking about. My friend asked her if there were alternate payment methods to avoid the fee and the answer the owner gave her said the fee was to cover the “normal tax amount” and she doesn’t mention processing fees at all. She is currently not offering a different payment method but is working on setting up ACH payments and says there will still be fees with that but less.
If she’s not using the entire surcharge to cover processing fees and its not going to sales tax, where is all this money going? She’s been doing this for years to potentially all her customers.
A month of classes is $120. I’ve been paying about $5 on top of that with the current 4.5% fee and now she wants to charge 8.5%? That’s $10.20 and multiply that by 12 if I take a year of classes, that’s $122.40 extra I shouldn’t be paying her.
She claims in the mass text that its for “business sustainability and operational purposes”
My questions:
Who do I report this business to? What Texas state or government department am I supposed to tell?
I know the debit surcharges are illegal but she’s potentially not reporting this extra revenue on her taxes or using the merchant fees as a tax deductible.
If I report her to a state/government department, can I still report her to Visa/Mastercard to get my money back on the most recent debit card I’ve been using?
I’m hoping to at least get the 2024 and 2025 surcharges back. No clue if I can recoup 2022 and 2023.
Is it necessary for me to try to resolve this myself first with the business owner before I report them to anyone at all?
I don’t feel comfortable reaching out and I have reason to believe she won’t do anything about this. In the past, when someone or myself has needed a refund she says it’s too hard to do or it’s not possible and gives us free class credits instead. I looked up the service she uses for payment processing. They charge a small fee to businesses for refunds.
I’m no longer giving this studio any additional money. I’m not planning to support any of her businesses in the future. I’m pissed off for all her customers she’s been scamming. Plenty of us can barely afford this hobby to begin with. I use most of the income from a seasonal side job to pay for these classes.