Dear Liz: Regarding the fees charged to use credit cards. Aren’t the fees charged by the credit card companies considered deductible expenses on the businesses’ taxes? It seems that if the customer pays the surcharge then the business claims a deduction on its taxes, the business is getting a big benefit. It’s nothing but a scam. If I’m paying the fee, then the business shouldn’t be able to deduct it.
Answer: You don’t have the accounting quite right. The surcharge you pay to use a credit card is generally considered income to the business. The deduction isn’t a windfall but prevents the business from being taxed on money it collected and then paid to the credit-card processor.
The surcharge allows the business to pass some or all of its processing costs onto the customers that cause it to incur the costs, rather than simply absorbing the expense. Of course, some customers will take their business elsewhere because of the surcharge, so the ultimate effect on profits is in question.
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