How to Calculate Ohio Sales Tax on Credit Card Surcharges

With credit card processing fees eating into margins, many Ohio small businesses have started adding a surcharge to credit card transactions. But this raises an immediate, often confusing question: Do you have to charge sales tax on the credit card surcharge itself?

The short answer in Ohio is: Yes, if the underlying item you are selling is taxable.

Let's break down exactly how Ohio views these fees and how you should calculate sales tax when you manually swipe a card or apply a surcharge.

The Ohio Tax Rule on Surcharges

According to the Ohio Department of Taxation, a credit card surcharge is considered part of the "price" of the transaction. The state’s definition of "price" includes the total amount of consideration for which property or services are sold.

Because the surcharge is a cost the customer must pay to complete the transaction using their preferred payment method, it is fundamentally tied to the sale.

Therefore:

• If the item or service being sold is taxable, the credit card surcharge is taxable.
• If the item or service being sold is exempt, the credit card surcharge is exempt.

How to Calculate the Tax

When calculating sales tax on a manual credit swipe or an added processing fee, you must apply the sales tax rate to the total amount, including the fee.

Example 1: A Taxable Sale

You sell a piece of furniture for $100 in an 8.00% tax county. The customer wants to pay with a credit card, and you charge a 3% surcharge ($3).

• Price of item: $100.00
• Credit Card Surcharge: $3.00
• Total Taxable Base: $103.00
• Ohio Sales Tax (8.0% of $103.00): $8.24
• Total Charged to Customer: $111.24

If your point-of-sale (POS) system calculates tax on the $100 first, and then tacks on a $3 fee without taxing the fee, you are technically under-collecting sales tax. If audited, the state will hold you responsible for the missing tax on the surcharge.

Example 2: An Exempt Sale

You sell groceries (which are generally tax-exempt in Ohio) for $50. You charge a 3% credit card surcharge ($1.50).

• Price of groceries: $50.00
• Credit Card Surcharge: $1.50
• Total Taxable Base: $0.00 (because the underlying goods are exempt)
• Ohio Sales Tax: $0.00
• Total Charged to Customer: $51.50

Example 3: Mixed Transactions

What if a customer buys a mix of taxable and exempt items?

If a customer buys $50 in groceries (exempt) and $50 in cleaning supplies (taxable), and you add a $3 credit card fee across the whole $100 purchase, you must allocate the fee proportionally.

Since 50% of the purchase is taxable, 50% of the fee ($1.50) becomes taxable. You would apply your local sales tax rate to the $50 in cleaning supplies plus the $1.50 allocated fee (a $51.50 taxable base).

The Trench Truth: Modern POS systems (like Square, Clover, or Toast) usually handle this allocation automatically if they are configured correctly. However, if you are calculating this manually or using an older terminal that just tacks on a flat fee at the end, you are at a high risk of an audit penalty. Check your POS settings today to ensure surcharges are included in the taxable base.

Use Our Calculator

To make sure you are calculating the right amount, including all fees, you can use our Ohio Sales Tax Calculator and simply enter the item price + the surcharge amount as the total price.