Illinois Interchange on Tax and Gratuity (2026)

Illinois' Interchange Fee Prohibition Act restricts interchange on the tax and gratuity portions of a card sale, and only after the merchant does the work. An issuer, payment card network, acquirer bank, or processor may not receive or charge interchange on those amounts if the merchant informs the acquirer bank or its designee of the tax or gratuity as part of authorization or settlement and transmits that data with the sale (815 ILCS 151/150-10(a)). If the amounts never go with the message, the merchant has 180 days to submit tax documentation, and the issuer then has 30 days to credit the interchange that sat on tax and tip (815 ILCS 151/150-10(b)). The compiled Illinois statute currently dates Article 150 to July 1, 2027 (815 ILCS 151/999-99, source note P.A. 104-532, effective June 26, 2026). Separately, the Office of the Comptroller of the Currency has concluded that federal law preempts the Act for national banks and federal savings associations (OCC Bulletin 2026-17, April 24, 2026; interim final order, 91 Fed. Reg. 23150, April 29, 2026, effective June 30, 2026). This is operations, not a slogan. It is not legal advice.

1. 1
   Read the current date. 815 ILCS 151 Article 150 is dated July 1, 2027 (P.A. 104-532). The OCC treats the Act as preempted for national banks and federal savings associations as of June 30, 2026.
2. 2
   Send tax and tip with the sale. The restriction applies only if you tell the acquirer the tax or gratuity amount at authorization or settlement and transmit that data.
3. 3
   Or file within 180 days. If the amounts did not travel with the sale, submit tax documentation within 180 days. The issuer then has 30 days to credit interchange on tax and tip.
4. 4
   Do not confuse layers. The statute names interchange. Assessments and processor markup are not waived. A surcharge program is a different stack.

What the statute forbids, and what it does not

Interchange is the wholesale fee the networks set and the issuing bank keeps. Illinois defines it, for this Act, as a fee established, charged, or received by a payment card network to compensate the issuer for its involvement in an electronic payment transaction (815 ILCS 151/150-5). That is the first of the three layers on a statement: interchange, assessments, and processor markup. The Act does not mention assessments. It does not mention markup. A processor that still bills a 10 basis-point markup on the full ticket, tax and tip included, is not "violating Illinois" by that fact alone.

The prohibition in Section 150-10 is conditional. The merchant must tell the acquirer the tax or gratuity amount as part of authorization or settlement and must transmit that data. "Merchant" here means a person that collects and remits a tax (815 ILCS 151/150-5). "Tax" means any use and occupation tax or excise tax imposed by the State or a unit of local government in Illinois. "Gratuity" means a voluntary monetary contribution to an employee from a guest, patron, or customer in connection with services rendered. A mandatory service charge or auto-gratuity is not, on that definition, the same thing as a voluntary tip. Treat that as a legal classification question, not a POS label.

Section 150-10(d) also forbids the other side from making up the lost interchange by raising the rate on the rest of the ticket.

Two paths: the message, or the file

Path one is the sale itself. Authorization is the request for approval. Settlement is the later process that transmits sales information for collection and reimbursement (both defined in 815 ILCS 151/150-5). The statute lets you use either clock. That matters in a restaurant: tax is known when the check is printed, before the guest adds a tip. Gratuity is often known only at capture, after the signed total. Sending tax at authorization and the tip in the clearing record is the design the statute describes. Sending a single undifferentiated total is not.

Path two is paperwork. If you did not transmit the amounts with the sale, you may submit tax documentation to the acquirer or its designee no later than 180 days after the sale. Within 30 days after that submission, the issuer must credit the interchange charged on the tax or gratuity amount. "Tax documentation" is enough for the network to see the total and the tax or gratuity: invoices, receipts, journals, ledgers, or tax returns, for one sale or many (815 ILCS 151/150-5). That is a back-office process, not a terminal toggle, and you can sit on the interchange for those 180 days plus the issuer's 30-day clock before a credit posts.

If you do nothing, nothing in Section 150-10 requires anyone to stop charging interchange on tax and tip.

What the slice is worth (illustrative)

Work a restaurant check. The numbers below are illustrative, not a published interchange category and not an Illinois tax table.

• Food and drink: $80.00
• Tax: $8.00 (a round 10 percent for the example)
• Voluntary tip: $16.00
• Total: $104.00

If interchange on that ticket were 2.00 percent of the total, interchange would be $2.08. Interchange on the $24.00 of tax and tip would be $0.48. That $0.48 is the slice the Act is about. Assessments still sit on the $104. Markup still sits on the $104. A regulated debit sale under Regulation II is already capped, for issuers with $10 billion or more in assets, at 21 cents plus 5 basis points, plus up to 1 cent if fraud-prevention standards are met (Federal Reserve, Regulation II). Five basis points of the $24.00 tax-and-tip slice is $0.012. The law, even when it applies, is not a rewrite of the whole bill.

Who is supposed to comply, and who the OCC already carved out

The Act names issuers, payment card networks, acquirer banks, and processors (815 ILCS 151/150-10(a)). A violation of the interchange prohibition, once the tax or gratuity data has been received, carries a civil penalty of $1,000 per electronic payment transaction, and the issuer must refund the merchant the interchange calculated on tax or gratuity (815 ILCS 151/150-15(a)). The merchant is not the party that statute fines.

Section 150-15(b) is a separate data-use limit: entities other than the merchant may not use the transaction data except to process the sale or as required by law. A violation is treated as a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act.

The OCC's interim final order, published April 29, 2026 and effective June 30, 2026, concludes that the National Bank Act and the Home Owners' Loan Act preempt both the interchange prohibition and the data-use limit for national banks and federal savings associations. Those institutions, the OCC says, are neither subject to nor required to comply (91 Fed. Reg. 23150; OCC Bulletin 2026-17, April 24, 2026). The same notice records litigation since shortly after enactment, Illinois Bankers Association v. Raoul in the Northern District of Illinois, and that the district court had already resolved National Bank Act preemption of the data-use limit in the banks' favor.

The OCC order does not amend the Illinois text. State-chartered institutions, credit unions, networks, and processors sit in a different stack. Do not assume coverage from the logo on the terminal. Ask who the registered acquirer is, and treat issuer mix as a counsel question.

The start date has moved. Public Act 104-0004 (effective June 16, 2025) pushed Article 150 from July 1, 2025 to July 1, 2026. The compiled ILCS now dates it to July 1, 2027 (P.A. 104-532, effective June 26, 2026; 815 ILCS 151/999-99). Read the compiled statute, not a 2024 recap.

This is not a surcharge, dual-price, or cash-discount program. Those stacks govern what you post to the guest. Illinois' Act governs what the issuer may collect on tax and tip after you identify those amounts. Mixing the two is how a restaurant ends up with a noncompliant card fee and no interchange relief.

What to do before 2027

Do not wait for a processor email that "Illinois took effect." Confirm three facts in writing: the current Article 150 date on the compiled ILCS, whether your acquirer treats the OCC order as applying to your MID, and whether your point of sale can put tax and voluntary gratuity into the authorization or settlement record as separate amounts. If the system only sends a total, path one is closed.

Ask the POS and the acquirer which fields they will actually populate: tax at authorization, gratuity at capture, or a later file. A restaurant that authorizes the known check and captures after the tip already has the two clocks the statute uses. A counter that rings a blended total does not.

Recompute effective rate the same way you always should: every processing line, including interchange, assessments, markup, and monthly extras, divided by card volume for the same period. If you want that split on a real statement, run the analyzer and look at how much of the bill is interchange versus everything else. The Illinois rule, when and where it actually applies, can only move the interchange piece that sat on tax and tip.

Do not promise a guest, a landlord, or a sales rep a savings percentage. The arithmetic is ticket-level, card-mix-level, and conditional on data you may not be sending today.

FAQ

Does Illinois ban swipe fees on sales tax and tips? It restricts interchange on the tax and gratuity portions of a card sale, and only if you tell the acquirer those amounts at authorization or settlement and transmit the data, or you submit tax documentation within 180 days. Assessments and processor markup are not in the statute.

When does the Illinois interchange tax and gratuity law take effect? The compiled Illinois statute currently dates Article 150 of 815 ILCS 151 to July 1, 2027 (source note P.A. 104-532, effective June 26, 2026). The start date has already been delayed more than once. Confirm the compiled ILCS, not a 2024 recap.

Do I have to change my POS for the Illinois tax interchange rule? If you want the real-time path, yes: tax and voluntary gratuity have to travel with authorization or settlement as separate amounts. A single undifferentiated total does not inform the acquirer. The fallback is tax documentation filed within 180 days of the sale.

Does this apply when a restaurant adds the tip after authorization? The statute allows the amounts at authorization or settlement. Tax is usually known on the first check. A voluntary tip is often known only at capture. Sending tax in the first message and the tip in the clearing record is the shape the text describes.

Does the Illinois law cut my processor markup too? No. The Act names interchange, the issuer's fee. Assessments and markup still sit on the full ticket unless your contract says otherwise. A lower interchange line is not a lower effective rate by itself.

Does this apply if my bank is a national bank? The OCC's interim final order, effective June 30, 2026, concludes that federal law preempts the Act for national banks and federal savings associations. That order does not rewrite the Illinois text for every other participant. Ask counsel who your acquirer and the issuers actually are.

Sources

• Illinois Compiled Statutes, 815 ILCS 151 (Interchange Fee Prohibition Act), compiled text of Sections 150-5, 150-10, 150-15, and 999-99, including the July 1, 2027 Article 150 date (source note P.A. 104-532, effective June 26, 2026).
• Public Act 104-0004 (effective June 16, 2025), delaying Article 150 from July 1, 2025 to July 1, 2026.
• OCC Bulletin 2026-17, Preemption of Illinois Interchange Fee Prohibition Act: Interim Final Order (April 24, 2026).
• Order Preempting the Illinois Interchange Fee Prohibition Act, 91 Fed. Reg. 23150 (April 29, 2026; effective June 30, 2026).
• Federal Reserve, Regulation II (Debit Card Interchange Fees and Routing), 21 cents plus 5 basis points for covered issuers, plus up to 1 cent if fraud-prevention standards are met.