DALLAS, Jan. 11, 2017 /PRNewswire/ -- In a recently published hearing (Hearing Number 110,908), a Texas administrative law judge held that a credit card processing company ("Taxpayer") incorrectly excluded from revenue interchange fees collected from merchants and forwarded to credit-card issuing banks. Interchange fees, assessment fees, and processing fees comprise the "merchant fee" paid by sellers for the privilege of using credit card networks. The interchange fees are amounts paid to the banks that issue branded credit cards (called issuer banks) and are intended to cover the bank's costs of authorizing, clearing, and settling credit card transactions.
Texas allows a company to exclude from its reported revenue flow-through funds that, by law, fiduciary duty, or contract, must be distributed to other entities. Examples of flow-through funds include taxes collected from customers and commissions paid to nonemployees.
The Taxpayer argued that the interchange fees received from merchants were flow-through funds for issuer banks. In finding that the Taxpayer had failed to prove that the interchange fees qualified as flow-through funds, the judge stated that he was not persuaded that the Taxpayer had a fiduciary duty to distribute the interchange fees to the issuer banks. In addition, because the Taxpayer did not have contracts with the issuer banks, the Taxpayer could not prove that it was obligated by contract to distribute the interchange fees to issuer banks. Further, the judge noted that the Taxpayer recognized the interchange fees as revenue on its federal income tax returns.
Ryan is an award-winning global tax services firm, with the largest indirect and property tax practices in North America and the seventh largest corporate tax practice in the United States. With global headquarters in Dallas, Texas, the Firm provides a comprehensive range of state, local, federal, and international tax advisory and consulting services on a multi-jurisdictional basis, including audit defense, tax recovery, credits and incentives, tax process improvement and automation, tax appeals, tax compliance, and strategic planning. Ryan is a five-time recipient of the International Service Excellence Award from the Customer Service Institute of America (CSIA) for its commitment to world-class client service. Empowered by the dynamic myRyan work environment, which is widely recognized as the most innovative in the tax services industry, Ryan's multi-disciplinary team of more than 2,100 professionals and associates serves over 12,000 clients in more than 40 countries, including many of the world's most prominent Global 5000 companies. More information about Ryan can be found at ryan.com.
TECHNICAL INFORMATION CONTACTS:
Eric L. Stein
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/texas-denies-claim-that-interchange-fees-are-flow-through-funds-excludable-from-revenue-300389341.html