FTA Bulletin: B-27/03: State Credit Card Survey

SUMMARY

FTA recently conducted a survey on how states use credit cards to facilitate the payment of taxes or fees collected by the states’ revenue agencies. The entire survey is attached. If you have any questions, please call on Ryan Burruss at ryan.burruss@taxadmin.org

FTA recently conducted a survey on how states use credit cards to facilitate the payment of taxes or fees collected by the states’ revenue agencies. The entire survey is attached to this bulletin.

Of the 33 states (including the District of Columbia and New York City) that responded, 30 currently have a program in place to accept credit card payments. (Note: Louisiana does not accept credit cards yet, but does accept e-checks.)

An overwhelming majority, (70%) of responding states, use a third party to process the payments; in this scenario, the taxpayer pays the fee to the third party. In contrast, seven revenue agencies pay at least some of the fees directly. The cost to the state in FY 2003 ranged from $70,000 to $1.4 million.

According to the survey, almost $700 million was collected from credit card, debit card and e-check payments over the course of FY 2003. This dwarfs the $190 million collected (as reported to the survey) by the states just two years earlier in FY 2001. Louisiana alone collected $170 million in e-checks in 2003. NYC, which allows credit card payments of parking tickets and real estate taxes (both paid to the New York City Department of Finance), collected $61 million and $90 million from credit cards and debit cards/e-checks, respectively. California collected over $80 million in credit, debit and e-check payments that same year.

In all, six states (20 percent of those responding with a credit card program in place) collected over $10 million in FY 2003 from credit card purchases alone. Four states (23.5 percent responding with an e-check/debit program in place) collected over $10 million in e-checks/debit transactions over that same time period.

In terms of total credit card transactions, New York City led the pack with almost 500,000 transactions in FY 2003. The second highest transaction count came from California Franchise Tax Board (86,000). Pennsylvania saw the biggest jump in participation, from 6,800 transactions in FY 2002 to over 29,000 the following year (representing an impressive 330 percent jump).

The total increase in participation in e-check/debit programs is also impressive. Whereas 4,700 transactions were tracked in FY 2001 and almost 33,000 in FY 2002, a whopping 125,000 transactions representing $376 million was recorded by the responding states in FY 2003.

Every state, except one, stated that they are either "satisfied" or "very satisfied" with the progress of their credit card payment programs.

In response, most states are expanding their programs. Of the 31 programs that have a credit, debit or e-check program in place, all but four responded that they have immediate plans to improve and add to the programs. Those plans include everything from adding more payment types via the Internet to expanding the program to include more tax types to adding direct debit/e-check transaction capabilities (for states that don’t already have it). Overall, the conventional wisdom seems to be heading towards broad acceptance of various payment types for most, if not all, tax types.

Also on the horizon, Louisiana is poised to begin accepting credit card payments next year. Tennessee plans to seek legislation authorizing acceptance of credit cards for all tax payment types in the 2004 legislative session.

If you have any questions about the survey or its results, please call on Ryan Burruss at ryan.burruss@taxadmin.org.