Every time a customer pays by card, part of the fee you pay is calculated on the whole ticket, including the sales tax you collect for the state. Illinois passed a law to stop that. Two delays and a federal court ruling later, many store owners are not sure whether it applies to them or when.
This guide explains what the Illinois Interchange Fee Prohibition Act (IFPA) does, where it stands as of October 2026 and what you can do now. It summarizes public reporting and is not legal advice.
Key takeaways
- The IFPA, passed in 2024, bars interchange fees on the sales tax and tip portion of a card transaction.
- Its start date has moved twice. The Illinois General Assembly voted on June 1, 2026 to move it to July 1, 2027, and the delay was awaiting the governor's signature in reporting from June and September 2026.
- On June 1, 2026, a federal court permanently blocked the fee limitation for national banks, federal savings associations, out-of-state state banks and the card networks.
- The law can still reach cards from Illinois-chartered state banks and credit unions, and further appeals are expected.
- Do not budget for savings yet. Keep tax recorded separately, understand your pricing model and ask your processor how it will handle the law.
What is the Illinois Interchange Fee Prohibition Act?
Interchange is the fee the card-issuing bank receives on each card sale. It is often the largest part of what you pay to accept cards, and it is calculated on the full transaction amount, including sales tax and tips.
The IFPA was passed in 2024. Payments Dive reports that it bars interchange fees on the tax and tip portion of bills. In plain terms, on a $100 sale plus $10 sales tax, the interchange percentage would apply to the $100, not the $110.
The American Bankers Association estimated that 1.3 million Illinois merchants would be affected, along with thousands of e-commerce retailers, according to Payments Dive.
When does the IFPA take effect?
The timeline has shifted several times:
| Date | What happened |
|---|---|
| 2024 | Illinois passes the IFPA |
| August 2024 | Bank and credit union groups sue to block the law |
| July 1, 2025 | Original start date, delayed one year after the court challenges |
| February 2026 | Court permanently blocks the law's separate data usage limitation |
| June 1, 2026 | Federal court permanently blocks the fee limitation for many issuers and the card networks |
| June 1, 2026 | General Assembly votes to move the start date to July 1, 2027 |
| September 2026 | Digital Transactions reports the delay is expected to be signed as part of the state budget |
| July 1, 2027 | New planned start date, if signed and not blocked further |
Check for updates before you plan around any date. The governor's signature and the expected appeal could each change the picture.
Who is still covered after the court ruling?
According to a legal analysis published on the Fintech and Digital Assets blog, the June 1, 2026 injunction covers national banks, federal savings associations, out-of-state state banks and payment card networks. The fee limitation can still apply to Illinois-chartered state banks and to federal and state credit unions.
That split matters because you do not choose which bank issued your customer's card. Some card sales could fall under the law and others could not. The plaintiffs have warned of the risk of inconsistent treatment for parties in the same transaction, and the analysis expects another appeal to the Seventh Circuit. Federal regulators, including the OCC and the National Credit Union Administration, have also moved to preempt the law, according to Payments Dive.
What should Illinois store owners do now?
1. Do not count on savings yet
With a delayed start date, a partial injunction and appeals ahead, any savings are uncertain. Plan your 2027 budget on today's processing costs.
2. Keep sales tax recorded separately on every sale
Whatever happens, a separate tax line on every transaction is the foundation. Make sure your POS calculates tax at the point of sale and shows it on the receipt, and that your reports separate tax from sales.
3. Understand your pricing model
How your processor prices affects whether you would ever see a change.
- Interchange-plus pricing passes the actual interchange cost through and adds a set markup, so a lower interchange charge shows up on your statement.
- Flat-rate pricing charges one rate per sale. A change in the underlying interchange may not change what you pay.
4. Ask your processor three questions
- Will you apply the IFPA to my transactions if it takes effect, and how?
- How will I see the adjustment on my statement?
- Will anything change in how I report tax or tips?
Get the answers in writing and save them with your processing agreement.
5. Calculate what is at stake for your store
As an example, a store with $500,000 in annual card sales at a combined 8% sales tax rate collects about $40,000 in tax through cards each year. At an illustrative interchange rate of 2%, the interchange on that tax portion is about $800 a year. Use your own card volume, tax rate and statement figures to find your number, and remember the law may cover only some of your customers' cards.
6. Keep watching
Follow your state retail association and your processor's notices through the first half of 2027.
How ShelfPerks helps
- Tax on every sale. ShelfPerks sales tax management calculates tax at the point of sale, sets tax by location, shows tax on receipts and generates tax reports.
- Pricing you can see. Through ShelfPerks, Helcim and Fiserv with Clover offer interchange-plus pricing. Other processors, including Stripe and Stax, are flat rate for now.
- Choice of processor. The ShelfPerks FAQ says you do not have to change your current payment provider. A $20 integration fee applies per provider account, per location, per month.
- Clear reports. Real-time analytics help you see card volume and sales trends by location.
For more on choosing a rate, read our ShelfPerks payment processing guide.
Frequently asked questions
What does the Illinois Interchange Fee Prohibition Act do?
The IFPA bars interchange fees on the sales tax and tip portion of a card transaction, so the interchange percentage would apply only to the purchase amount.
When does the Illinois IFPA take effect?
The Illinois General Assembly voted on June 1, 2026 to move the start date to July 1, 2027. As of September 2026 reporting, the delay was expected to be signed as part of the state budget.
Is the Illinois swipe fee law blocked?
Partly. On June 1, 2026, a federal court permanently blocked the fee limitation for national banks, federal savings associations, out-of-state state banks and the card networks. It can still apply to Illinois-chartered state banks and credit unions, and further appeals are expected.
Will the IFPA lower my processing fees?
Possibly, on some transactions, if it takes effect. Because the court ruling excluded many card issuers, any savings may be partial, and on flat-rate pricing you may not see a change at all. Ask your processor how it will apply the law.
What should Illinois retailers do before July 2027?
Keep sales tax recorded separately on every sale, understand whether you are on interchange-plus or flat-rate pricing, ask your processor in writing how it will handle the law and watch for further court and legislative updates.
Your next step
Pull last month's processing statement and find your effective rate: total fees divided by total card sales. To see tax, payments and reports in one system, try ShelfPerks with a 14-day free trial of Premium features, no credit card required, at grow.shelfperks.com.
