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Cash Discount or Credit Card Surcharge? Considerations for New York Restaurants

In New York’s bustling culinary landscape, where gastronomic delights await around every corner, it might come as a surprise that restaurants often refrain from imposing credit card surcharges on their customers. While credit card fees can be a common practice in various parts of the world, the state of New York has stringent regulations in place that prevent restaurants from passing these charges onto their patrons.

The reason behind this prohibition lies in the General Business Law of New York, specifically Section 518, which states that no seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar items. The law was enacted to protect consumers from hidden fees and promote transparent pricing. While businesses could offer discounts to customers who pay with cash, they could not impose an additional fee on credit card transactions.

Credit card surcharges must be posted in New York State

In December 2020, the New York State Division of Consumer Protection issued a statement reminding customers that credit card surcharges are prohibited in New York State. Earlier this year, Senate Bill S1048A was introduced to amend the general law in relation to requiring sellers to clearly post the price of a credit card surcharge. The bill was delivered to the New York State governor for signing.

Senate bill S1048A requires sellers to post the price of a credit card surcharge on any credit card transaction. This prohibits business owners, like those in the hospitality business, from advertising one price and changing the price when paying by credit card. Business owners are now required to notify customers of the higher credit card price for service by posting the higher price for all patrons to see.

Paying by cash

If customers are paying by cash, they might get a chance to save some money. An owner can still offer a discount to customers who pay in cash but cannot charge more at the register simply because a consumer uses their credit card.

Using a debit card

New Yorkers who use debit cards do not receive the same protection as those using credit cards. A surcharge or higher fee for the use of a debit card is permitted but must be accompanied by clear disclosure at the establishment. The bill does not prohibit establishments from offering a two-tier pricing system. A civil penalty can be assessed, not to exceed $500 for each violation.

In New York State, the New York State Attorney General has authority to enforce these laws and the Division of Consumer Protection is charged with assisting consumers with their violation complaints.


New York's stance on credit card surcharges is part of a broader effort to ensure fairness and consumer rights in commercial transactions. The goal is to prevent customers from being caught off guard by unexpected charges and to maintain a level playing field for various payment methods.

To navigate these regulations, some New York restaurants have adopted a different approach to incentivize cash payments. Instead of imposing credit card surcharges, they offer a cash discount to customers who opt for this payment method. By promoting cash transactions through discounts, these establishments stay compliant with the law while still encouraging the use of cash, which can help reduce transaction fees for the business.

While credit card surcharges might be a common practice in other regions, New York's legal framework prioritizes consumer protection and transparency. So, the next time you dine out in New York, you can appreciate not only the delectable cuisine but also the state's dedication to providing a straightforward and fair dining experience for all.

Sales tax implications and the dilemma

When making a sale of food, drink, tangible personal property like bottled water or candy, or services that are subject to sales tax, an added surcharge is part of the receipts for such and must be included in the base upon which sales tax is calculated.

When offering a discount for paying by cash, the taxable receipt is reduced by the discount to calculate the sales tax.

When we revert to transparency, the sales tax amount must be clearly presented on any sales slip, invoice, receipt, or other statement or memorandum of the price. This means that the tax charged must be stated, charged, and shown separately on the first of such documents given to the customer. The dilemma is that many restaurants do not know how the customer will be paying prior to printing the check. A server can certainly ask the patrons for their intended payment method in advance but what happens if two or more patrons are at one table, and they decide to split the check and have different payment methods? The surcharging laws say that businesses can only charge a surcharge to recover the costs of processing the transaction - they cannot make a profit from surcharging. This cost is reflected as a percentage of the transaction processed. In the case of patrons splitting the bill and using different payment options, only the ones paying by credit card are subject to the fee and no fee is allowed to be charged to the cash paying customer. Not adhering to this could cause a major pitfall that could ultimately cost restaurants more money than the surcharge is worth.

If you have any questions about the potential impact of New York State credit card surcharge laws on your business, please reach out to Stacy Gilbert at, Denise Koch at, or a member of our Restaurants and Hospitality Industry Practice.

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