April 20, 2007 -- Retail industry leaders this week urged lawmakers to pass legislation curbing the $36 billion in fees credit-card companies charge on the sales tax portion of retail purchases, a practice they say amounts to a hidden tax that's driving up prices.

So-called intercharge fees, which apply to all retail credit-card purchases, are added to transactions after sales taxes are applied, Mallory Duncan, a senior vice president of the National Retail Federation, told a gathering of state legislators in Washington on Thursday.

The average intercharge fee is about two percent, roughly equal to the average profit margins of most retailers, according to the national trade group.

"When Visa and MasterCard take their cut, they don't take it on just the retail sales, they take it on the entire transaction," Duncan said. "That drives up prices even higher, and everybody ends up paying a tax on a tax."

Nine states have introduced bills aimed at reining in the fees, including Florida, Kansas, Nevada, New York, and Washington. There is currently no pending federal legislation regarding the issue. Last year, the Senate Judiciary Committee has held a public hearing on the legality of the fees.

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