ICSA calls on the government to remove interchange fees on the tax portion of every sale
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Independent convenience stores dutifully collect taxes on behalf of the government every time we make a sale. Since we are low-margin, high-volume businesses and sell highly-taxed products like fuel, alcohol, and tobacco, we collect a very significant amount of tax relative to our modest profits. In fact, over 40% of all convenience store revenue is tax that must be paid to the government.
The problem is that we are required by credit card networks to pay interchange fees on those sales volumes, even though we are merely acting as tax collectors for the government. This fundamentally unfair setup costs the average Canadian convenience store over $30,000 per year. It is important to understand that this money goes to enormous foreign companies like Visa and Mastercard, not the government. Removing these unfair fees would empower Canadian entrepreneurs without costing our social services a cent in revenue.
Massive retailers like Costco and Walmart are able to demand lower interchange fees from credit card networks, who fear being shut out of their franchises. Small businesses like ours obviously do not possess enough leverage to negotiate similarly favourable deals. That means that local convenience stores run by incredibly hardworking entrepreneurs pay more, for the same service, for no good reason.
In 2023, the Government of Canada capped interchange fees, but only for businesses with annual Visa sales volume under $300,000 and annual Mastercard revenue under $175,000. For convenience stores who are open 365 days per year, that works out to $822 per day of Visa sales and $479 per day of Mastercard sales.
This threshold is too low to benefit many independent stores, particularly those who sell fuel. The vast majority of fuel buyers pay with credit cards, and any Canadian who has experienced the rising costs of energy over the past several years will understand that these levels of sales volumes can be reached by a relatively small gas station within a few hours.
Whether the price of gasoline and diesel rises or falls, independent convenience stores earn the same thin margin on top of the wholesale price they must pay. Convenience stores who sell fuel do not benefit from higher prices the way oil producers and refiners do and in fact, higher fuel prices hurt us because they cause consumers to spend less on goods in-store.
What’s more, as the cost of fuel rises, our stores are hit by an increasing amount of credit card interchange fees. If filling your tank costs $100 instead of $60, our profit stays the same but the amount we are forced to pay Visa and Mastercard rises significantly. And of course, the higher cost of fuel makes it nearly impossible for even the smallest gas stations to stay under the revenue thresholds set out in 2023.
Eliminating fees collected by enormous American companies with an effective monopoly in their industry would save our businesses nearly $90 million per year, allowing us to invest in our stores, hire more staff, and take other actions that benefit the Canadian economy.
Further, eliminating interchange fees would not cost the government a cent of revenue used to pay for important social services we rely on. We would continue to pay the government the same amount of tax, with only fees to credit card networks removed.
