The cost of processing a check mailed to our lock box (remittance processing operation) is far less expensive and more efficient than the cost of handling an electronic check payment or credit card transaction. Our high speed NCR remittance processors handle thousands of transactions per hour and automatically match the check to the bill, scan and endorse the check, create a file to update the taxpayer’s record, and prepare the checks for deposit.
Debit card and credit card transactions require special handling by tax collector staff to update the customers account. In addition, the processing company and credit card companies charge the merchant (in this case the County) a percentage of the transaction (2.29%) for credit cards and debit cards when paying by phone or online. Internet Transactions are charged a higher percentage by the credit card companies due to the high incidence of fraud they experience on Internet transactions (even though we argue that there is little likelihood that an individual would pay their taxes with a stolen card.)
Although merchants do not appear to pass on the credit card fee to customers, they can do so through adjusting the cost of their product. Also, they can increase their sales by accepting credit cards. Although it appears an agency such as the DMV is not charging individual customers a "convenience fee" for credit card transactions, the cost is included in the fees. DMV has a fairly fixed cost for registration and tax, and they have included in them in the costs the fees is calculated on - so non-credit card payers are absorbing that cost in the fee.
In the County’s situation, property taxes are set by Proposition 13 (Article 13 of the State Constitution). The County only retains about 16% of the taxes we collect. The bulk of the taxes go to school districts, with a significant portion going to cities and special districts (park and fire districts). Per state law, we are not able to pass on the extra cost of accepting credit cards to the other taxing entities without their approval, and none have been willing to share in this cost. Additionally, tax bills range from $10.00 to millions. Based on the size of the tax roll if the County accepted property tax payments without the convenience fee, we estimate the cost to the County could be up to $6 million per year.
A number of tax payers want the option of being able to pay with electronic check or their credit cards, so we have followed the lead of the Franchise Tax Board and the Internal Revenue Service and selected a third party vendor, Payment Express, to accept credit card and debit card payments on our behalf, and pay for all the associated fees through the convenience fee for 2.29% of the tax payment (with a minimum fee amount of $1.95 for tax payments) made with a credit or debit card, or a $1.95 flat fee for payments made with a debit card (with a PIN) in-person at our office. There is currently no fee to process payments made by e-check. They can be reached at 1-877-818-4323 or 1-844-430-2823. You can also email Payment Express at: Payments@paymentexpress.com.
Finally, federal, state and local taxing agencies are continually lobbying the credit card industry and banks to waive the credit card fees for tax payments, to date our efforts have not been successful.