We are not lawyers, but we wrote about this Toast nonsense five months ago.
As more information is submitted to us, it definitely looks to be deserving of a more formal and serious investigation on behalf of the tax authorities where Toast operates, and the card networks as well.
Toast, like other processors, allows their merchants to pass the cost of processing cards (which is ironically high for Toast merchants because Toast is a greedy pig) to the end customer.
This is called surcharging, and pursuant to the credit card networks comes with pretty black and white rules.
First we should look at the evidence: a Toast merchant operating in New Jersey is applying a 3% card surcharge.
The first thing that catches our eye is that the customer is paying with a Visa debit card.
Debit cards cannot be surcharged per network rules.
From Visa,
Question.
I am a merchant who intends to surcharge. What is the process I need to follow?
Answer.
U.S. merchants that intend to surcharge are required to:– Notify Visa and your acquirer at least 30 days in advance of beginning to surcharge; a notification form to Visa can be submitted at www.visa.com/merchantsurcharging.
– Limit surcharging to credit cards only (no surcharging debit and prepaid cards) and limit the amount to your merchant discount rate for the applicable credit card surcharged
– Disclose the surcharge as a merchant fee and clearly alert consumers to the practice at the point of sale – both in store and online – and on every receipt. Merchants should also consider whether they comply with all applicable state or federal laws. Currently, 10 U.S. states have surcharging restrictions including California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.
https://usa.visa.com/dam/VCOM/download/merchants/surcharging-faq-by-merchants.pdf
Well, this is a very clearly a Visa debit card, and it’s very clearly being surcharged.
Fail # 1.
Next is the tax calculation, which appears to be inaccurately reporting dollars to the State of New Jersey, or ripping 20 additional basis points from the merchant.
Adding up the line items on the receipt, one arrives at $180 of expenses.
Then there’s Toast’s “3%” surcharge fee of $5.76.
Well, $5.76 is actually 3.2% of $180… so what’s going on?
What’s going on is that Toast is throwing the sales tax into the line items THEN calculating the 3% surcharge.
Adding the $12.31 in sales tax to $180 gets us to $192.31, and wouldn’t you know it 3% of $192.31 is…
drumroll…
$5.76.
If Toast had correctly calculated the 3% surcharge on $180 the surcharge amount would have been $5.40.
The taxable sales would have been $185.40, and New Jersey’s sales tax of 6.625% would come to $12.28, not $12.31.
It would seem from our math that the merchant, the consumer, or the State of New Jersey has a real gripe.
Fail #2.
There’s enough flimsy math in Toast’s billing that it’s highly likely that either the state or the merchant is getting screwed, and this should be audited by a professional body as it could be poignantly argued that Toast is fleecing at least one party in its arrangementa, and if so Toast is undeniably incurring material liabilities.
Just for funsies we traced this back and found that the acquiring bank on record was JP Morgan Chase, not Citizens (a Worldpay bank). So it would seem that Toast has moved at least some volume from Worldpay to Chase.
Wonder how Jamie Dimon would feel about this level of payment bro Tomf*ckery and its association with his bank.